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__Abstract__ What ought government to do? This has been the guiding question of the research that resulted in this Dissertation. In it, the author makes a number of contributions to the field of public economics by challenging conventional wisdom on optimal taxation, optimal redistribution, and optimal minimum wages. Among other things, it is shown how government should use corrective taxation when people do not always act in their own interest, why a decrease of the minimum wage is part of a reform that would make everybody better off, and that income taxation and unemployment benefits should be higher in times of high involuntary unemployment. __In Dutch__ Verlaag het minimumloon en compenseer mensen met een laag inkomen via lastenverlichting. Dat advies geeft econoom Aart Gerritsen de overheid in zijn proefschrift 'Essays in Optimal Government Policy'. Volgens hem kan herverdeling van inkomens beter worden georganiseerd door middel van progressieve belastingen dan met het wettelijk minimumloon. Gerritsen verwerpt verder een aantal conventionele wijsheden over zowel het wettelijk minimumloon als optimaal belastingbeleid. Zo pleit hij voor hogere inkomstenbelasting en werkloosheidsuitkeringen ten tijde van economische tegenspoed. Gerritsen analyseerde voor zijn proefschrift de effecten van minimumloon en lastenverlichting op het netto-inkomen van laagbetaalden. Hij stelt dat discussies over het minimumloon doorgaans gebrekkig zijn omdat ze niet ingaan op alternatieve manieren van herverdeling. Volgens Gerritsen is er echter een andere manier om het netto-inkomen van laagbetaalden te verhogen: via de belastingen. Op basis van zijn analyse komt hij tot de conclusie dat een verlaging van het minimumloon, gecompenseerd door lastenverlichting voor lage inkomens, sociaal wenselijk is. Net als een hoger minimumloon kan ook een lastenverlichting leiden tot een hoger netto-inkomen voor laagbetaalden. Er zijn echter twee punten waarop een minimumloon cruciaal verschilt van een belastingverlaging voor deze groep. Aan de ene kant leidt een minimumloon tot hogere loonkosten en daardoor tot hogere werkloosheid onder laaggeschoolden. Dit is een welvaartsverlies. Aan de andere kant biedt deze hogere werkloosheid onder laaggeschoolden hen prikkels om meer te investeren in scholing om op die manier aan de hogere werkloosheid te ontkomen. Dit is een welvaartswinst, omdat hoger geschoolden doorgaans meer belasting betalen. Op basis van data van een groot aantal OESO-landen concludeert Gerritsen dat voor vrijwel ieder land de winst van het scholingseffect te klein is om de schade van het werkloosheidseffect te kunnen compenseren. Gerritsen adviseert dan ook een lager minimumloon met compensatie via lastenverlichting. Hogere uitkeringen Gerritsen ontwikkelde daarnaast nieuwe inzichten op het gebied van de inkomstenbelasting. Zowel belastingen als uitkeringen geven werknemers prikkels om minder te werken. Normaal leidt dit tot minder economische activiteit en zijn ze daarom schadelijk voor de economie. Gerritsen laat zien dat deze logica niet opgaat tijdens perioden van hoge werkloosheid. Er zijn dan immers al teveel mensen op zoek naar werk die het niet kunnen vinden. Het ontmoedigende effect van belastingen en uitkeringen leidt er in dat geval toe dat mensen die weinig belang hechten aan werk vrijwillig uittreden of minder gaan werken. Dit is sociaal wenselijk omdat zij hiermee ruimte creëren op de arbeidsmarkt voor mensen die meer belang hechten aan een baan. Om die reden zouden de inkomstenbelasting en werkloosheidsuitkeringen hoger moeten zijn ten tijde van economische tegenspoed, aldus Gerritsen. Tot slot breekt Gerritsen met de standaard economische welvaartsanalyse, die aanneemt dat mensen altijd in hun eigen belang handelen. Hij analyseert data over het subjectieve welzijn van Britten en komt tot de conclusie dat werknemers met een laag inkomen gemiddeld minder werken dan goed is voor henzelf. Werknemers met een hoog inkomen werken gemiddeld juist meer dan goed voor hen is. Om dit te corrigeren, zou de Britse overheid lagere marginale belastingtarieven voor de onderkant en hogere marginale belastingtarieven voor de bovenkant van de inkomensverdeling moeten doorvoeren.

Ministerial remits for children, young people and families in Theresa May's minority government

Defence date: 20 November 2015 ; Examining Board: Professor Russell Cooper, Penn State University, Supervisor; Professor Elena Carletti, EUI & Bocconi University; Professor Yan Bai, University of Rochester; Professor Alexander Guembel, Toulouse School of Economics ; This thesis consists of two chapters exploring how even benevolent governments may struggle to convince their citizens that they will stick to the policies that ensure the best outcomes in equilibrium. If people believe that the government will optimally choose a different policy in the event of a crisis, their reaction to that belief may in fact bring about just such a crisis. This thesis investigates the circumstances in which these kinds of commitment problems can be overcome. The first chapter is on bank resolution, where the choice between resolving insolvent banks and bailing them out creates a time inconsistency problem. To deter banks from taking excessive risks, governments want to convince them that they will choose resolution. However, when facing the costs of liquidating banks, governments may be tempted to bail them out instead. By strengthening their bank resolution regimes, governments reduce these costs, thus credibly committing themselves to choosing resolution over bailouts. Governments with greater resources face a more severe commitment problem. When banks interact strategically, improving the resolution regime can eliminate equilibria in which they coordinate on risky investment strategies. In the second chapter, Antoine Camous and I present a theory linking the cyclicality of fiscal policy to inherited public debt. When debt is low, fiscal policy is countercyclical, in the sense that the government responds to reductions in output by cutting the tax rate. Above a threshold level of debt, however, optimal fiscal policy becomes procyclical. This creates the possibility of self-fulfilling crises, in which output is low because workers expect high taxes, and the government sets high taxes because output is low. Our model suggests why highly indebted governments might implement procyclical fiscal policy during recessions, even without facing high sovereign risk premia.

This paper asks: What is the effect of government policy on output and inequality in an environment with education and labor-supply decisions? The answer is given in a general equilibrium model, consistent with the post 1960s facts on male wage inequality and labor supply in the U.S. In the model, education and labor-supply decisions depend on progressive income taxation, the education system, the social security system, and technology-driven wage differentials. Government policies affect output and inequality through two channels. First, a policy change leads to an asymmetric adjustment of working hours and savings of schooled and unschooled individuals. Second, there is a redistribution of the workforce between schooled and unschooled workers. Using a battery of proposed government policies, we demonstrate that skill redistribution dampens the response of wage inequality to a policy change and amplifies the response of output by an additional 1 to 2 percent.

A perennial question for students of democracy is the extent to which government policies align with voter preferences. This is often studied by comparing median voter opinion on a left–right scale with the cabinet weighted mean, that is, the mean left–right position of cabinet parties, weighted by their legislative sizes. Government positions may also be estimated from their declarations, however. In a recent investigation, McDonald and Budge found that declared government policy better accords with the voter median than with the cabinet weighted mean, a finding they interpreted as consistent with their hypothesis that actual government policy tends to reflect a "median mandate." This investigation retests the McDonald–Budge model using a time-series cross-section methodology and an expanded data set. It finds no support for a median mandate interpretation but strong evidence that declared government positions respond to the positions of cabinet parties and, where present, external support parties. It also reveals a tendency for declared positions to be shifted to the right of the cabinet mean, a tendency that increases with the length of time that has elapsed since the last election (particularly for left-wing governments). This evidence that the policies governments set out to implement are systematically "right shifted" bears major consequences for our understanding of representative democracy.

Investment will create a multiplier effect for the economy, especially investments from abroad which may also encourage the technology spillover and innovation process. Political risk and government investment policy are two factors considered by investors in investing. This research aimed to determine the effect of these two factors on foreign direct investment (FDI) in Indonesia. This research used data of FDI in Indonesia in 2010-2017, during which there were three changes in foreign direct investment policies in Indonesia and one political year. Using panel data analysis, this research found that government policy in revising the negative investment list had no significant effect on FDI flows in Indonesia. It can be seen that the sector effect experiencing a tightening of foreign asset ownership limitation on FDI was greater than the sector effect experiencing loosening of asset ownership limitation by foreign parties. In addition, this research found that political risk had no significant effect on FDI in Indonesia.Keywords: FDI, Politics, Policy.

The wave of migration of Rohingya refugees has come unstoppably in the waters of Aceh since late 2015. The violence that engulfs the Rohingyas in Myanmar, such as homicide and arson, has forced some Rohingyas to flee. They are trying to survive by moving to areas they consider to be providing protection. With less decent boats, the Rohingyas migrated to the coast of Thailand, Malaysia, to Indonesia. The Armed Forces of the Republic of Indonesia have sought to close the refugee entry into the territory of the Unitary State of the Republic of Indonesia in order to safeguard the security of foreign infiltration. Nevertheless, the Indonesian army continues to assist the refugees by providing food and water supplies to the boat. However, the urge of local and international community finally made the Indonesian government open the territory of Indonesia for Rohingya refugees. Why is the Indonesian government willing to accept Rohingya refugees? What is Indonesian policy towards Rohingya refugees? This article will describe the reasons and steps of the Indonesian government to handle the wave of migration of Rohingya refugees by the end of 2015 as a form of Government of Indonesia's policy towards Rohingya refugees.

In International Irrigation Management Institute, Participatory management in Sri Lanka's irrigation schemes (pp. 17-28). Digana Village via Kandy, Sri Lanka: IIMI

This volume explains a major gap between the stated aims of governments and the actual outcomes. Based on systematic theoretical and empirical analysis, the book helps us understand the puzzle enough to warn against repeating many mistakes of the past.

This article addresses the interconnections between two seemingly disparate worlds—the world of abstract economic analysis and the world of policy and politics, drawing on the author's personal experience in the two worlds. A fundamental premise underlying the analysis is that it is a society's ideas and beliefs that are ultimately responsible for its development. The absence of good, scientific ideas proves to be the biggest stumbling block in crafting good policies. Keynes was right when he wrote that 'the power of vested interest is vastly exaggerated compared to the gradual encroachment of ideas.' So was Nehru when, in 1929, in a speech in New Delhi, he urged his young audience: 'The world is moved by ideas.' India today stands on the cusp of a major economic take-off. It is up to us to seize the moment. To do so, however, we need to bring the best ideas from the world of scientific enquiry into the humdrum world of politics and policy. The aim of this article is to illustrate by drawing on real-life examples, that it is possible to do so.

AbstractIn the last decade, the UK Government has attempted to implement improved processes and procedures in modelling and analysis in response to the Laidlaw report of 2012 and the Macpherson review of 2013. The Laidlaw report was commissioned after failings during the Intercity West Coast Rail (ICWC) Franchise procurement exercise by the Department for Transport (DfT) that led to a legal challenge of the analytical models used within the exercise. The Macpherson review looked into the quality assurance of Government analytical models in the context of the experience with the Intercity West Coast franchise competition. This paper examines what progress has been made in the 8 years since the Laidlaw report in model building and best practise in government and proposes several recommendations for ways forward. This paper also discusses the Lords Science and Technology Committees of June 2020 that analysed the failings in the modelling of COVID. Despite going on to influence policy, many of the same issues raised within the Laidlaw and Macpherson Reports were also present in the Lords Science and Technology Committee enquiry. We examine the technical and organisational challenges to progress in this area and make recommendations for a way forward.

Governments can soften the impact of the business cycles on welfare caseloads introducing changes in benefit levels or in the proportion of claimants that enter in the program. This paper is motivated by this concern and takes as its starting point both the intensive literature on the determinants of welfare caseloads and the fundamentals of public choice theory applied to the design of welfare programs. The paper is based on data from the minimum income program of Catalonia's Government (PIRMI). We use time-series analysis to find that unemployment has strong and significant lagged effects on the caseload. Second, the generosity of the program is clearly predictive of receipt of benefit even in a context of high and growing unemployment rates. We also found, however, a fairly strong correlation between unemployment growth and the proportion of rejected applications. This later parameter might have been the chosen tool to moderate the increase in the number of recipients. ; España. Ministerio de Ciencia y Tecnología ECO2010- 21668-C03-01