Ernest M. Zampelli

The fungibility of U.S. military and non-military assistance and the impacts on expenditures of major aid recipients

Abstract This paper examines the impact of U.S. military and non-military assistance on the allocation of public and private sector spending for eight major recipients over the 1972–1987 period. The model assumes that an aid recipients effective post-assistance budget constraint is a priori unknown and must be estimated. Two versions of the model are tested. In version (A), the data is converted into real U.S. dollars using official exchange rates; in version (B), the data is converted using purchasing power parity exchange rates provided by Summers and Heston (1991). Major findings are the same for both versions. U.S. aid is highly fungible with a significant portion channeled to the private sector where it finances current consumption relatively more than investment.

Disentangling the demand function from the production function for local public services: The case of public safety

Abstract In this paper we develop a theoretical framework and an econometric model which allow us to separate the effect of income and other socioeconomic variables on the demand for publicly provided goods from their effect on the price of those goods. We apply our approach in a study of expenditures for police protection in a cross-section of 73 U.S. cities and counties. Our results suggest that studies of public expenditures which fail to incorporate community characteristics in production and cost functions can yield very misleading results.

Volunteerism: The Influences of Social, Religious, and Human Capital

This article uses data from the 2006 Social Capital Community Survey to examine the impact of social capital, religious capital, human capital, and attitudes on volunteerism. Five alternative struc...This article uses data from the 2006 Social Capital Community Survey to examine the impact of social capital, religious capital, human capital, and attitudes on volunteerism. Five alternative structural models are estimated. Tests reveal unambiguously the inferiority of the Tobit model and point to a double-hurdle model with independent errors as the best alternative. Major findings are that more diversity in friendships and more education increase the likelihood of volunteering, greater intensity of religious belief increases the level of volunteerism, and more informal social networking and formal group involvement along with greater religious participation increase both the likelihood and level of volunteering. Study results suggest strongly that the nonprofit voluntary sector has a vested interest in promoting policies that expand educational opportunities and foster civil engagement, social interaction, and religious participation.

Local characteristics and public production: The case of education

In a long tradition of papers beginning with Borcherding and Deacon [5] and Bergstrom and Goodman [3], local government expenditure is viewed as the outcome of a political process in which the utility of the median voter is maximized subject to an appropriate resource constraint. Expenditures are specified as a function of the median voter’s income, the tax price, and a set of local characteristics representing the tastes of the jurisdiction’s residents. The tax price variable incorporates the median voter’s tax share and unit costs of providing local public services, which depend on input prices and population served. Local variables, though included on the demand side as taste factors, are assumed to have no effect on the cost of producing local public services. In this paper we ask whether local variables affect production costs directly. Using California data in which taste factors are virtually eliminated from the demand for education expenditure, we find that local variables alTect the production of education achievement sign&~&y. Empirical estimates from median voter models in which local variables are

Does accounting conservatism pay

We investigate whether or not there is a link between conservative accounting practices and the sensitivity of executive pay to accounting performance. Using several accrual-based measures of accounting conservatism as well as alternative measures of accounting performance, we estimate an econometric model of CEO compensation that incorporates the interaction of accounting conservatism and accounting performance. Consistent with optimal contracting theory, we find that the sensitivity of executive pay to accounting performance is higher for firms that report conservative accounting earnings. These results support the hypothesis that accounting conservatism, by limiting earnings management opportunities and improving the reliability of accounting performance measures, allows firms to formulate contracts that tie executive compensation more closely to accounting performance.

The fungibility of US assistance to developing countries and the impact on recipient expanditures: a case study of Pakistan

Abstract Development assistance continues to be an important source of funds to developing nations. Donor countries prefer to provide categorical (or project) aid since it is believed that the typing of aid to a specific project will help to ensure that the funds are used in accordance with the designated objectives. Development literature indicates, however, that the ability to tie aid may be illusory. Specifically, recipient nations can cut the ties associated with categorical aid and effectively transform it into purely income-augmenting funds, i.e., purely fungible resources. The funds legally designated for specific developmental purposes may finance projects whose purposes are not in line with the developmental objective. The fungibility of development assistance has received little empirical attention. This paper is an effort to fill that gap. We formulate an econometric model that explains the response of Pakistans spending for defense, public nondefense, and private consumption to US assistance within the “fungibility” framework. Our results suggest that US assistance to Pakistan, whether military or nonmilitary, is fully transformed into fungible resources with impact on public spending less significant than expected.

Sensitivity of Executive Pay to Accounting Performance Measures in All-Equity Firms

We investigate the relation between chief executive officer compensation and accounting performance measures as a function of the firms capital structure. We specifically analyse pay-performance relationships for all-equity firms relative to high-levered firms. We find a significant positive association between return on equity and the level of compensation for all-equity firms. Consistent with optimal contracting theory, we cannot discern any such relationship for high-levered firms. Because of agency costs of debt, managerial compensation in high-levered firms plays the role of a precommitment mechanism in addition to its conventional role of aligning management incentives with shareholder interest. Copyright 2005 Accounting and Finance Association of Australia and New Zealand..

The impacts of religion, political ideology, and social capital on religious and secular giving: evidence from the 2006 Social Capital Community Survey

Using a double hurdle model and data from the 2006 Social Capital Community Survey (SCCS2006) we examine religious and secular giving, focusing on the impacts of religion, political ideology and social capital. Our main results indicate that greater participation in religious activities positively impacts religious and secular giving, the intensity of religious belief increases religious giving at the expense of secular giving, religious giving by very conservative individuals is higher than for other ideological groups, and measures of social capital are very important in raising the level and likelihood of philanthropic giving.

An Assessment of Alternative Structural Models of Philanthropic Behavior

In this article, the question of whether differences in four structural models of charitable behavior make any difference to the findings regarding the major determinants of philanthropic contributions is addressed. Using data from Independent Sector’s Giving and Volunteering Survey, giving and volunteering equations using the standard Tobit model, the “Heckit” model, the Cragg model with uncorrelated errors, and the Cragg model with correlated errors are estimated. Results indicate that the generalized two-stage approaches are far superior to the standard Tobit model for both monetary donations and volunteer time. For monetary giving, parameter estimates of the second-stage contribution equations are similar across the three alternative two-stage methods and there is no evidence of correlation between the first- and second-stage error terms. Second-stage estimates for volunteering from the Heckit and Cragg models with correlated errors are also similar and offer compelling evidence of correlated error terms.

Does board governance improve the quality of accounting earnings

Purpose - The purpose of this paper is to examine the contention that a strengthening of corporate governance mechanisms would result in the improved relevance and reliability of financial statements. Design/methodology/approach - Using pooled ordinary least squares regression, the paper analyse the quality of reported earnings for a sample of firms over the 1998-2002 time period. Findings - The findings show negative and statistically significant associations between reported earnings quality and the proportion of CEO incentive pay and firms growth opportunities. It is also found that earnings quality is positively and significantly related to the existence of an orderly CEO transition process. However, board independence does not seem to be associated with earnings quality. Research limitations/implications - Since the sample of firms is from the 1998 to 2002 period, consistent with the papers motivation, the results may not generalize to the more recent time period. Practical implications - The results provide support for the argument that the current structure of executive pay does adversely impact the quality of reported earnings and hence provides a rationale for closer scrutiny of executive pay by regulatory bodies. Additionally, the findings suggest that the emphasis on board independence as an effective monitoring device may be misplaced. Originality/value - Unlike prior studies, the papers hypotheses are derived from an explicit agency theoretic optimization model of managerial decision making. The paper uses the Ball and Shivakumar model for estimating abnormal accruals unlike previous analyses that relied more heavily on the Jones model. The paper also adds to past studies of the relationship between corporate governance and earnings quality and the role of executive compensation.