This paper establishes a connection between labor market reforms and an increase in the reforming country's net foreign asset position through a precautionary savings channel. We use data from the German Socioeconomic Panel to document significant changes in the savings behavior of the most affected groups in response to the reform. We then construct a heterogeneous agent model of a small open economy with labor market frictions to assess the current account effects of the major German unemployment benefit reform (Hartz IV). Our findings show that the reduction in the generosity of the unemployment insurance scheme leads to a significant increase in precautionary savings. As a result, since not all of these additional savings can be absorbed domestically, the net foreign asset position and the current account rise. Furthermore, welfare gains and losses are distributed unequally among agents. Compared to a closed economy, the reform is more detrimental.

In recent years the debate on the state's role has shifted towards the empirical assessments of technical efficiency of public spending. This paper analyses the efficiency of public expenditure across 28 states in India from 2000 to 2019 and similarly for 19 major states, using a composite public sector performance (PSP) index and data envelopment analysis. A single input-oriented variable returns to Scale DEA, a non-parametric analysis is done to analyze the efficiency and total revenue expenditure as a share of GDP is taken as the input and the outputs are various socioeconomic indicators as a proxy for outcome. The DEA analysis suggests that Indian states could reduce their public spending by 64% and 58% for all states and 19 states analysis respectively and still achieve similar output. This study adds to the literature by conducting an inter-temporal analysis of public expenditure efficiency across Indian states by identifying the trends.

This article provides evidence that increased salience of public service provision can strengthen the social contract and increase tax compliance in a low-capacity setting. I conduct a field experiment randomizing information about public service provision across 5,494 property owners and tenants in Freetown, Sierra Leone. Receiving information increases property tax payments by 20% on average. The effect is driven by increases in tax compliance on both the extensive and intensive margin. Residents of low-value properties are 7–16 percentage points more likely to pay taxes when informed about public services that are both geographically accessible and respond to the citizens’ most urgent needs, suggesting a benefit-based approach to taxation. Revenue effects are largely driven by residents of high-value properties, who depend less on the public provision of services, and for whom the treatment seems to act as a more general signal of government performance.

Governments provide many goods and services without charge, making it impossible to use market prices to assess their values or significance. This paper proposes that government size be measured by the opportunity cost of government activity, as reflected in the value of foregone private output. Properly applied, this entails two important changes to the current national income accounting treatment of government product: exclusion of expenditures on intermediate goods and services provided to businesses, and replacement of the government price deflator with an appropriately modified private sector price deflator. The price deflator adjustment alone implies that average annual government output growth is 1.0 percent higher than currently measured, and that average annual GDP growth is 0.13 percent higher.