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Fiscal Decentralization and Economic Growth in Pakistan Free Essays
FISCAL DECENTRALIZATION AND ECONOMIC GROWTH IN PAKITAN A Thesis Submitted to the Faculty of Institute of Management Sciences, Peshawar In Partial Fulfilment of the Requirements for the Degree of MBA (Finance) (2009-2011) Institute of Management Sciences, Peshawar Chapter 1: Introduction According to James Edwin Kee, Fiscal decentralization is the devolution of certain administrative and fiscal powers and functions to the sub-national governments. It also means the shifting of responsibility to the low-level governments with concomitant accountability. The extent of Fiscal devolution can be measured in terms of the powers of low-level governments to raise revenue or to incur expenditures. We will write a custom essay sample on Fiscal Decentralization and Economic Growth in Pakistan or any similar topic only for you Order Now Fiscal devolution in the public sector has received great attention during the last two decades for many reasons. The implications of financial autonomy on the performance of sub level government and economic growth has been studied widely both for the developing and the developed world. In transition countries, with the disintegration of centralized system, fiscal federalism emerged; and in many developing countries, like India, Brazil and Argentina, financial decentralization was debated regarding its effects on economic stabilization. Some studies have, however, suggested that the relationship between the two has not been conclusive. [Financial devolution] is reckoned as a key policy tool that ensures economic efficiency and good governance through financial autonomy of the [federating units]. It leads to the integration of provinces and enhances their participatory role in the economic development of a country. It relieves the central government from paying attention to the details of financial matters, thereby enabling it to undertake the tasks at national level in a more effective and efficient manner. Also, if the central government for some reasons becomes inefficient, then devolution can be a possible solution. It accelerates growth and empowers the low-level governments through financial autonomy and administrative empowerment. The devolution makes the federating units more responsible as it brings the government closer to the people. Decentralization policy has a positive effect on economic growth as it helps implement social policies in a better manner. In decentralized set ups, the lower tiers of governments know more about the necessities and developmental needs of the people, which leads to economic efficiency in service delivery, thereby accelerating the growth rate at national and regional levels. This is also called the ââ¬Å"Oats Decentralization Theoremâ⬠. It says that if the people in one municipality are not provided with adequate public services, they may opt for shifting to other municipalities having more facilities. Financial autonomy reduces the wasteful utilization of resources by the central government. According to Bird and Smart (2002), for effective service delivery it is important that the recipient of funds has clear mandate, sufficient resources and powers to make decisions. Through decentralization, responsibilities as well as resources are devolved to the lower level governments (Rondinelli,1981). In this way , the federating units are empowered which enable them to use the resources to good effect , raise living standard of the people and distribute the work load (Gordin, 2004). In Pakistanââ¬â¢s case, the significance of Fiscal devolution cannot be overemphasized. Pakistan is a federation having a centralized taxation system. The major chunk of revenue is collected by the central government, which is then distributed among the provinces to remove financial disparities. Article 160 of the constitution empowers the president that he shall constitute National Finance Commission after every five years for the distribution of funds, taxes and other monetary assets among the federating units. The decision of the commission is called National Finance Commission Award. The commission is comprised of the finance ministers of the federation and the provinces and such other persons as may be appointed by the president in consultation with the governors of the respective provinces. So far, seven NFC Awards have been announced, the latest being the 7th NFC Award of 2010. Except for the 1974 Award, there has been a growing tendency in the transfer of revenue from the centre to the provinces. The 4th NFC Award was a significant move forward towards fiscal decentralization as it enhanced the share of the provinces by 18% and accepted their right over hydel profit, developmental surcharge and excise duty on crude oil. The 7th NFC Award accepted the demands of Baluchistan, KPK, Sindh by devising a formula, wherein poverty, inverse population density and under development have also been given due weightage. Moreover, the provincial share has been enhanced from the previous 47. 5% to 56%. The provinces were also given the powers to collect Sales Tax on their own. Following this decision, the Sindh Province has already undertaken this task and claims to have collected 50% more Sales Tax in the first five months of the financial year compared to the corresponding period last year [Dawn, Dec 10, 2011]. The 8th Financial Award is scheduled to be held on 16th Dec, 2011. Apart from the resource distribution Through NFC Award, Article 161 of the Constitution provides for transfer of Royalty on natural resources to the respective provinces in the shape of surcharge on gas and crude oil. This will lead to greater transfer of funds from the centre to the provinces. With the 18th Constitutional amendment, the concurrent list has been abolished, and with it entry No. 49 in the 4th Schedule to the Federal Legislative list has also been amended. As a result, the GST Services in Federal Excise mode have been assigned to the provinces. Despite the presence of this constitutional mechanism for resource distribution, the smooth allocation of funds was interrupted due to deadlocks among the provinces over the distribution formula, and, resultantly, the NFC Award failed to narrow down the vertical and horizontal resource gaps. At the district level, The National Reconstruction Bureau launched a decentralization programmed through Government Plan 2000, wherein it was acknowledged that without Fiscal Decentralization no authority is devolved, which further emphasizes the importance of transfer of funds to the lower tiers of government. The above paragraphs portray only one side of the picture. There are many studies which suggest that there is no direct relationship between fiscal devolution and economic growth and efficiency at the level of sub-national governments. As a matter of fact, there is also a strong case against the Fiscal federalism. It may lead to social inequalities as for instance, incomes and taxes may not be equitably distributed among the various regions of a country. Also, fixed costs are associated with running administrations of low-level governments. So, in low-income countries it may not be justified to spend substantial amount of the available funds on these expenses (Homme,1995). The relationship of Fiscal devolution and economic growth has been studied extensively in recent years. So, large volume of literature is available on the topic. Different relationships were studied to establish any clear relationship between Fiscal devolution and economic growth, but inconsistent results were obtained both for the developed and the developing economies. Some studies have shown positive relationship, others negative and still others no relationship at all between economic growth and fiscal autonomy. For Pakistan, too, studies have yet to find any clear relationship between financial decentralization and economic growth. Important contributions on this subject have been made by Zang and Zou(1998) ,Xie , Zou and Davoodi (1999) , Lin and Liu (2000) , Thieben (2001) , Martinez-Vazquez , McNab(2001) , Felenstine Iwata (2005) and Kardar (2006) etc. This study identifies strengths and weaknesses of the existing Resource Distribution System (RDS) through historical review. It is generally believed that that proper information about the existing RDS will lead to better policy formulation, which will ultimately put the country on the road to prosperity. In this connection, it is also worthwhile to analyze the implications of the current resource distribution policies on the economic growth of the country. Thus, this study helps ascertain the extent of financial autonomy of the provinces and measures its long term benefits. Rest of the study is arranged as follows: Chapter 2 pertains to Literature review i. e. study conducted previously by other researchers on this topic; In chapter 3 theoretical background and econometric methodology for our estimation is being discussed; chapter 4 discusses sources of our data and construction of variables; chapter 5 covers results and interpretation thereof results and chapter 6 is about the conclusion of research. Chapter 2 Literature Review 2. 1 Introduction In this chapter, we discuss the empirical studies related to our study i. e. work done previously by other researchers on this topic. 2. 2 Previous empirical studies The significance of relationship between the financial autonomy and economic growth can be gauged from the volume of literature available on this topic. Various important relationships were studied to establish clear relationship between the two, but inconsistent results were obtained both for the developed and the developing economies. For Pakistan too studies have yet to find any clear relationship between financial decentralization and economic growth. On leafing through the pages of available literature, one comes across valuable work on the topic, some of which is discussed in the following paras: Davoodi and Zou (1998) developed a theoretical model for studying the relationship between Fiscal autonomy and economic growth on the basis of averaged panel data of 46 countries. The study showed a negative relationship between the two for developing countries. Zhang and Zou (1998), while using Chinaââ¬â¢s provincial panel data for the period 1978-1992, found a negative association between provincial economic growth and the degree of financial autonomy over the past fifteen years. Philips and Woller (1997) studied the above referred relationship for seventeen developed and twenty three less developed countries on the data collected for the period 1974 to 1991. A negative weakly significant relationship was found for the developed world. However, no such relationship could be proved between the two variables for the less developed countries. Xie , Zou and Davoodi (1999) observed that there is a highly insignificant relationship between Fiscal Decentralization and economic growth for the United States, which the authors attributed to the fact that the country had already reached optimal level of fiscal autonomy and thus no further progress on this line was possible. Thieban (2001) made use of OECD countries cross sectional data for the period 1975 to 1995, but the study failed to establish any link between revenue decentralization of the low-level governments and economic growth of these countries. Martinez ââ¬âVazquez and Mc Nab (2001) concluded that the relationship between fiscal decentralization and economic growth is still unclear, and that little attention has been paid to indirect factors through which fiscal devolution may influence economic growth. In contrast to the above findings, Lin and Liu (2000), while using panel data of 28 provinces for the period 1970 to 1993, arrived at the conclusion that there exists a positive relationship between fiscal decentralization and economic growth in China. The authors noted that the impressive growth of china for the last twenty years can be linked to fiscal reforms. Ebel and Yilmaz (2001), observed that Fiscal design of OECD countries is unable to explain Fiscal decentralization in true sense. Martinez ââ¬âVazquez and Mc Nab (2003), on the basis of panel data, covering the period 1972-1997, studied the direct and indirect relationship between fiscal decentralization, economic growth and macroeconomic stability . They arrived at the conclusion that devolution minimizes the inflation rate, has no direct influence on economic growth, and has positive indirect effect on growth as it results in on macroeconomic stability. Justin Yifu and Zhiqiang (2000), investigated the implications of fiscal decentralization of economic growth in China, and found that it has made remarkable contribution to economic growth. This finding is in conformity with the hypothesis that Fiscal devolution enhances economic efficiency. Fielstentein and Iwata (2005), while using VAR (Vector Auto regressive) model found that there is a relationship between decentralization and macro economic performance in China. They concluded that Fiscal decentralization is positively related to growth in the period after the war, and has negative effects on the inflation rate after the 1970s. While using the cross country data for 78 countries, Mello and Barenstein (2001) observed that as the share of receipts, including non-tax revenue, grants and transfer of funds, from the federal government increases in the total provincial revenues, the relationship between financial devolution and governance grows stronger. Shah (1991) pointed out that poor performance in most of the developing countries in the last 40 years can be attributed to highly centralized regimes. Huther and Shah (1998) noted that good governance and fiscal decentralization are positively related, which in turn may enhance economic growth. Akai and Sakata (2002) used single country data and predicted that fiscal decentralization plays a role in economic development. They pointed out that in the United States, high government spending was required in the initial phases of economic development, therefore, any analysis that took into consideration this period is bound to overestimate the role of central government in the economic development. This led Xie et al (1999) to declare that decentralization has adverse effect on economic development. Jorge Martinez-Vazquez and Mark Rider (2006) pointed out the structure of financial system plays a pivotal role in determining the conduct and performance of low-level governments, which indirectly influence economic growth of a country. According to them, though both China and India show great financial decentralization, the central governments restrict the fiscal autonomy of the sub-national governments through conditional grants and inadequate powers to raise revenue. Thus, the regional governments are forced to use extra budgetary allocations to overcome their financial constraints, which results in waste of resources. These structural infirmities in the financial systems entail profligacy and unproductive expenditure policies, which may hamper the growth rate in the future in both the countries. Nobuo Akai, Yukihiro Nishimura and Masayo Sakata (2007), while using panel data of the fifty states of the US, showed that fiscal decentralization minimizes the variance of GDP growth due to decentralization among various levels of government. They also observed that there exists a negative relationship between fiscal devolution and economic volatility. Hiroko Uchimora and Yurika Suzuki (2009) studied Fiscal Decentralization in the Philippines after the promulgation of Local Government code (1991) . This study examined the fiscal relationship between the central and sub national governments by using the indicators of Fiscal decentralization. According to their findings, in the Philippines, the responsibility to incur expenditures by the local governments is not accompanied by corresponding strengthening of the fiscal capacity. As a result, local governments rely heavily on fiscal transfers from the central government and Internal Revenues Allotment, which render the local finance unstable. Atushi Alimi(2004) Although , in theory, decentralization promises efficient provision of public services at local level, empirical evidence gives a mixed picture regarding its implications on economic growth. They attempted to resolve this inconsistency by using instrumental technique on the data for the period 1997 to 2001. In this study, fiscal decentralization is measured in terms of the ratio between local expenditure to total government expenditure. The result showed a significant positive relationship between per capita growth rate and Fiscal decentralization. Perraton, J. and Wells, p. (2003), in their paper, ââ¬ËMulti level governance and Economic cohesionââ¬â¢ noted three general trends in economic policy making: the transfer of powers to supranational institution in economic policy formulation, e. g. he formation of the European Union and World Trade Organization; secondly, almost all developed countries have established regional organizations, to which powers of economic policy-making have been devolved. In the transition states, there is a growing tendency towards decentralization to curtail expenditures and to make the governments more accountable; thirdly, the governments are now inclined to reduce their sizes and make alternate arrangements for governance through NGOs. This concept o f governance is referred to as multi-level governance. In Pakistanââ¬â¢s case, Fiscal Federalism has been studied in detail. According to Anwar Shah, World Bank (Dec, 2006), there are two ways of transferring funds from the Centre to the provinces: assigning share of the federal revenues to the provinces at a pre-determined rate and direct transfer of funds (other than revenue) from the Centre to the provinces. According to him, the revenue sharing system in Pakistan affects the transfers in a lump sum and predictable manner to the federating units, which are at liberty to use these funds the way they choose. The author further argues that NFC places greater responsibility of revenue collection on the Federal government, thereby making the tax machinery efficient and tax compliance cost effective. The Revenue sharing system may have its merits, but it is also associated with certain demerits. For example, the provinces enjoy vast discretion in the utilization of funds, but have no control over the amount of funds they receive from the centre ; the federal government cannot influence the provinces to set priorities for achieving uniform standards in reas like health and Education; the provinces receive the funds without any strings attached to it , therefore, they feel less accountable while spending the funds; the share received by the provinces have no relation with the expenditures they incur, as usually the expenditures outgrow the rate at which the Federal revenue grows. Nighat Bilgrami and Mahpara Sadaqat (2006) have given an account of evolution and working of NFC Award ever since i ts introduction in 1951. According to the authors, with the exception of 1974 Award, there is a growing tendency in increase of revenue transfer to the provinces. The major step forward in this direction was the 1991 NFC Award, wherein new taxes were included in the divisible pool. In addition, as envisaged in Article 161 of the Constitution, royalty on crude oil and surcharge on gas were also transferred to the provinces. This caused greater decentralization of funds, which over a period of time played a pivotal role in improving service delivery in health, education and irrigation etc sectors. The paper identifies various forms of fund transfers from the Federal government to the provinces. These include Revenue Sharing Transfers, Straight transfers, Recurring Grants, Development Grants and loans. The authors have also elucidated that how resources are transferred in Pakistan from the federal government to the provinces in four ways: from the centre to the provinces, from provincial to local governments, from the federal government to the local governments and from local to local governments. The paper also gives a rationale for transfers of resources from the federal to provincial and municipal governments. At the end of the paper, the authors have suggested that smaller provinces be provided with soft loans and factors like backwardness and poverty be also considered while allocating the resources. Moreover, the provinces should be allowed to generate revenues that fall within their domain. Iftikhar Ahmed, Usman Mustafa and Mahmood Khalid (2007) have dilated upon the evolution of resource distribution over time. According to them the divisible pool has been expanded by the inclusion of more taxes. However, as population is the sole criteria for the distribution of resources through NFC awards, it has given birth to serious differences among the provinces. The paper says that resources are transferred from the centre to the provinces in two ways: Systematic or Formula Based transfer, comprising of revenue sharing and Random transfer, including grants, executive discretionary funds and Parliamentarian funds etc. According to the authors, with the passage of time the federal government has become more centralized, thereby adversely affecting the efficiency of the provincial governments. The federal government has got engaged in activities that purely fall within the purview of provinces. These include irrigation, roads, culture, tourism, youth affairs etc. This has increased the burden on federal government. The Federal government collects 93 % of the revenue but expends only 72%, whereas the provinces generate just 7% but spend 28%. The argument behind greater revenue collection by the centre is that it is more efficient in revenue collection than the provinces. But this argument is flawed as the provincial and local governments are left with lesser opportunities to collect revenue. This results in the dependency of the provinces on the federal government for transfer of resources. In this paper, NFC Award has also been criticized in that the criteria for resource distribution are mainly population. Elsewhere in the world, other factors like backwardness, population density, and revenue generation are also considered while devising a formula for distribution of resources. According to the authors, the major shift towards fiscal decentralization appeared in the 1996 NFC Award, whereby all duties and taxes were included in the divisible pool. By so doing transparency and predictability in resource distribution was though enhanced, yet the resource distribution formula between the federal and provincial governments changed little. The paper says that resources distribution has never been taken seriously. Only one criterion, that is population, has been followed for resource distribution, thatââ¬â¢s why the NFC Award has failed to resolve the problem of Fiscal Decentralization. Usman Mustafa (2011) has highlighted the importance of federal form of government and has argued that even European Union has the characteristics of federalism. While referring to works of notable authors on the subject, it has been argued that Fiscal Decentralization increases efficiency, transparency and accountability. According to the author, in Pakistanââ¬â¢s case, there are pre-federalism (from 1947-71) and post federalism (from 1973 onwards) periods. In the first perid, the authority was centralized (one unit), whereas the second period is characterized by the march towards decentralization of powers from the centre to the provinces. In this context, the author argues that NFC Award is a step forward towards decentralization. He, however, criticizes population being suitable criteria for resource distribution between the centre and the provinces. In order to remove the grievances of the smaller provinces, a historical decision was taken in the 7th NFC Award on Dec, 2009 at Gawadar, to which all the provinces agreed. In this award, the demands of the smaller provinces were accepted, and a multifactor formula was devised. In the formula, factors like poverty, underdevelopment and inverse population density were also included for resource distribution. Moreover, the Federation sacrificed more that 10% of its share in favour of the provinces. It was also agreed that collection charges received by the Federal government on revenue would be curtailed from the existing 5% to 1%. This will increase the volume of net transfer of revenue from the federal to the provincial governments. All these decisions taken in the 7th NFC Award will contribute favourably towards Fiscal Decentralization in Pakistan. According to Kardar (2006), local governments have significance both in the context of Devolution plan and failure of central and provincial governments to deliver quality services to the masses ever since the emergence of Pakistan. He further argued that though legislation on devolution is a landmark achievement, the biggest challenge is to settle the row over powers between the provinces and district governments. Dr. Shahnawaz Malik, Mahmood-ul-Hassan and Shahzad Hussein analyzed the relationship between Fiscal decentralization and economic growth for the period 1971-2005. They obtained mixed results on the basis of different variables used in analysis. The study further showed that with the continuous rise in the share of provincial government revenues and expenditures, economic growth slows down. Naeem-ur-Rehman Khattak, Iftikhar Ahmed and Jangraiz Khan, while using time series data, for the period 1980 to 2007, analyzed the resource distribution, and studied the impact of financial decentralization on the economic growth of Pakistan. According to them, the divisible pool has expanded over the years by the inclusion of more taxes in it. They pointed out that the resource distribution mechanism failed to affect economic growth positively, and suggested that the distribution formula be revisited, having regard to factors like tax collection and backwardness of the provinces. They further suggested that more powers be delegated to the provinces to raise their own revenues. Chapter 3 THEORETICAL BACKGROUND AND ECONMETRIC METHODOLOGY 3. 1 Introduction In this chapter we discuss the theory which guides our research, variables of our model, type of statistical relationship and the model we will use for estimation. 3. 2 THEORETICAL BACKGROUND Various forms of Decentralization. It refers to the delegation of powers and functions from the central to low-level governments. There are three main forms of decentralization (JICA 2008): . 2. 1. Decentralization It is the weakest type of decentralization, and refers to the transfer of decision making powers along with financial and management responsibilities from the officials in the centre to those serving in the local /regional offices. 3. 2. 2. Delegation Here the powers are delegated to the autonomous bodies, including corporations, housing authoritiesââ¬â¢ etc. , working under the supervision of the central go vernment. These organizations enjoy vast discretion and decision making powers. 3. 2. 3. Devolution It is the gradual transfer of administrative, financial and political authority to the local bodies, which exercise their powers and functions within certain geographical confines. It has three main constituents, as discussed below: a) Political decentralization It refers to the shifting of powers and authority to local bodies, run by local political representatives. It has a well-established system of political decision-making and accountability at the local level. b) Administrative decentralization It is the form of devolution whereby staff of line ministry is dissociated from their corresponding ministries and brought under the control of the local administration. This is done through establishing local pay roll, which empowers them to reward and punish the staff. c) Fiscal decentralization It refers to the shifting of authority and responsibility to the sub-level governments with regard to decision-making on distribution of financial resources. This also includes the powers to raise local revenue. Fiscal decentralization has attracted great attention, among the economic circles, especially for improving service delivery at the local level. The main objectives of Fiscal decentralization include efficient utilization of resources, effective service delivery, macroeconomic stability and economic growth. With these objectives in view, the developing world is following the principle of Subsidiarity, which emphasizes that authority should rest with the lower tiers of government for effective use, and that the responsibility of incurring expenditures should match with adequate financing. Decentralization leads to efficient utilization of funds through improvement in governance, as lower strata of government can better assess peopleââ¬â¢s problems and know their priorities. Decentralization enhances participation of local population as the beneficiaries are directly involved in planning the allocation of funds. Increased decentralization gives birth to democratization, which keeps the government close to the masses, thereby making it more accountable. 3. 3 Various theories regarding decentralization The above narrated advantages, and many more not discussed here, emphasize the importance of Fiscal decentralization. But it was since the publishing of Tieboutââ¬â¢s article, ââ¬Å"A pure theory of local Expenditureâ⬠that this concept has gained great popularity among the theorists, and the volume of literature on this topic has increased tremendously. According to Tibeout (1956), Fiscal decentralization improves production efficiency through greater mass mobilization. In 1959 Musgrave pointed out that the role of government is to bring stability to the market and effect the redistribution of income. He further argued that efficient utilization of resources can be secured only when local tastes and choices are taken into consideration. Oates (1972) pointed out that people living in different localities have peculiar tastes and preferences for public service, therefore, local governments, as against central government, being better informed, will provide better services to its citizens. This concept is called Oates ââ¬Å"Decentralization Theoremâ⬠, according to which economic efficiency can be enhanced by decentralizing the availability of public goods and services. Thus, the central government should be responsible for devising a national policy and providing efficient levels of government for distribution of goods . (Oates,2005) So, equipped with the requisite paraphernalia , the sub-national governments are in a better position to put in place welfare-maximizing policies. Cremer, Estach and Seebright (1994), stated that government at the centre cannot reach the information about local tastes and choices. Thus, it is through Fiscal Decentralization that local agents can bring about efficient supply of goods and services to their constituencies. Almost identical views were expressed by Qian and Weingast (1997), who opined that decentralization puts a check on budget expansion by promoting competition and strengthening accountability, which effects supply of goods and services in an efficient manner. Having said this, there is always a tendency among the local political agents to enlarge the scope of public goods and services at the cost of other jurisdictions. Rodden (2003) attributed this predilection to the type of decentralization being followed. If decentralization is dependent on self-generated tax revenue, smaller governments emerge; and if transfer of funds occurs from the centre, it results in budget expansion. Though from economic and political point of view there are many benefits of Fiscal decentralization, yet it is not a cure for all ills. For instance, Fiscal Decentralization entails loss of Economies of Scale and loosens control over scarce resources. From it follows that centralization and Decentralization are not alternatives, rather the countries should find a balance between the two as per their requirements. . 4. Rationale for Fiscal Transfer in Pakistan The first reason is the general perception that the federal government is better equipped to collect major taxes, but is inefficient to collect smaller taxes. Also, the federal government may undertake major projects, but fail to deliver on smaller projects. Hence, the efficiency criteria must be followed while deciding allocation of means and responsibilitie s. The second reason for resource transfer from the centre to the provinces is that the latter lack the resources to finance the provision of even basic services. In the last ten years, the average revenue generated by the centre, provinces and municipalities stand at 89%, 5% and 6% respectively. As against the revenue generation, the share in recurring expenditure of the federal, provincial and municipal governments is 74%, 23% and 4% respectively. As regards developmental expenditure, the share of these governments is as follows: Federal government 65%, provincial government 25% and municipal governments 6%. These figures indicate that the provinces have limited resources vis-a-vis the amount of expenditure they incur. This necessitates the transfer of resources from federal to lower-tiers of government. Another reason that can be attributed to the allocation of resources among the different levels of government is Adequacy of Revenue. This concept refers to the capability of government not only to generate the initial revenue required to start a project but also to its ability to sustain it. In Pakistanââ¬â¢s case, Adequacy of revenue does not exist; hence transfer of resources to the lower tiers of government is necessary if they are to undertake any such projects. The fourth reason of transfer funds from the centre to the provinces is that there are taxes which though provincial in nature but is collected by the federal government, for example Sales Tax. Another rationale for transfer of funds is that federal government uses certain taxes for the overall stabilization of the economy; hence they should be under the control of the federal government. [NFC AWARDS Commentary and Agenda, Nighat Bilagarami, Jaffery and Mahpara Sadaqat (2006)]. 3. 5 ECONMETRIC METHODOLOGY 3. 5. 1Augmented Dicky Fuller (ADF) Test In this study a time series data is being used. Since this kind of data is usually non-stationary in nature, we first test it for stationarity or non-stationarity. For this purpose, an enhanced version of Dicky fuller Test, known as Augmented Dicky Fuller Test, is being employed. The ADF includes extra lagged terms of the dependant variable so as to remove auto-correlation. The following equations denote the three possible forms of ADF Test. i) Without any constant and trend ?yt=? *yt-1+i=1p? i? yt-i+et ii) Constant with non trend ?yt=a+? *yt-1i=1p? i+? yt-1+et iii) Constant with trend ?yt=a+? t+? *yt-1+i=1p? i+? yt-1+et Of the above equations, (iii) represents a more generalized form of ADF Test. Mackinnon(1991) gave critical values for the DF test The critical values for the ADF Test are the same as those for Dickey Fuller Test. If the DF Statistical value is smaller than the critical value, Null hypothesis of a unit root is rejected, which suggests that the yt is stationary process or the variables are stationary. If on running the ADF Test the variables are found non-stationary in their original levels of series, the variables are made stationary in their first difference level of the series. . 5. 2 Ordinary least square model (OLS) Once the variables are made stationary, estimation is made by employing Ordinary least square model (OLS). This model is suitable for ascertaining linear interdependencies in a time series data. Here it is also worthwhile to discuss Regression model. A multiple linear regression model estimates value of dependant variable (also called response variable) on the basis o f independent variables (also called explanatory variables). But there is always a difference in estimated and observed values. Therefore, a Regression model also possess unexplained variable, also called error term, which measures the difference between observed and estimated values. y= b+b1 x1+ b2 x2+ b x3 â⬠¦Ã¢â¬ ¦ +ei A regression model will be ââ¬Å"best fitâ⬠if the difference between observed and estimated value is minimum. We cannot take error term by simply adding all the difference between observed and estimated value because it may contain both positive and negative values which can cancel the effect of each other. So, we take the square of error terms which leads us to OLS . i. e. minimum squared difference. OLS is useful for structural inference and policy analysis. For the purpose of Structural Analysis of data, certain assumptions regarding the causality of data are made. These are : error term (i) is normally distributed (ii) has zero expected value of mean (iii) has constant variance in each time period and for all values of X and (iv) its value in one time period is unrelated to its value in another time period. OLS is a very simple technique by which we can calculate the coefficient of each variable in other words it gives us the impact of one variable on another variable, which is summarized by impulse response function. | | | | | Chapter 4 DATA AND VARIABLE 4. 1 INTRODUCTION This chapter covers how data is collected, what are sources of our data and how variables have been constructed variables for our estimation. 4. 2 Data type For the purpose of studying the relationship between Fiscal decentralization and economic growth, secondary data is being utilized. 4. 3 Sources of data For the purpose of this study the following sources have been utilized. i) Issues of ââ¬Å"Economic survey of Pakistanâ⬠ii)World Development Indicators iii)Ten years in Pakistan Statisticsâ⬠(1983) iv)UNDP Human Development Report, 2007. )Hand book of Statistics on Pakistan Economy (2005)â⬠4. 4 Construction of variables Economic growth of the country is taken as dependant variable. It is measured in terms of per capita Log of per capita gross domestic product (LYP), which is rebased by the year 2000 market prices. The variable is expressed in real terms using GDP deflator to ascertain the pattern of economic growth over the years. The Fiscal decentralization is captured on the ratio of Provincial share in Total Revenue to the Total Revenue (PRFR). The data source for these variables is ââ¬Å"Economic survey of Pakistan and covers the period from 1964 to 2008. As regards investment, it is captured by the Gross Fixed Capital Formation (GFCF) and data is taken from ââ¬Å"Pakistan Economic Surveyâ⬠Moreover, a variable for trade openness (OPN) is also used in the estimation model. This variable is obtained by adding imports and exports and dividing the same by LYP (at market prices). Here, too, the source of data is ââ¬Å"Economic Survey of Pakistanâ⬠Other variables in the estimation model are Tax to GDP ratio (TGDP) and GINI co-efficient, the latter being used to calculate income equality and its source is UNDP Human Development Report. Chapter 5 RESULTS AND DISCUSSION . 1 INTRODUCTION The section consists of results and their interpretation. In para 5. 1, 5. 2 and 5. 3 Stationarity of data, Autocorrelation and the results of OLS model respectively have been discussed. 5. 2 Unit Root test In a time series data, the major problem is the non-stationarity of variables. So, before estimation, a test is applied to make the variables stationary. For this purpose various tests can be employed, but in our case we have used Augmented Dickey Fuller test, the results of which are shown in table 5. 1 below. Table 5. 1 UNIT ROOT TEST| Non stationary variables| ADF-value| 5% Critical value| Gfcf| -1. 693492| -2. 9303| Gini| -2. 462911| -2. 9303| Lpy| 0. 863730| -2. 9303| PRFR| -2. 206432| -2. 9303| TGDP| 0. 158213| -2. 9303| Stationary variables| | ADF-value| Critical value| Gfcf| -3. 997577| -2. 9320| Gini| -4. 766215| -2. 9320| Lpy| -4. 632922| -2. 9320| OPN| -3. 453532| -2. 9303| PRFR| -3. 662186| -2. 9320| TGDP| -3. 01612| -2. 9320| Gfcf- Gross fixed capital formation, Gini- Income inequality, Lpy- Log of GDP, OPN- Openness to trade (export+import/GDP), PRFR- Ratio of provincial shares in total revenue to total revenue, TGDP- Tax to GDP ratio. At the level, all the variables except ââ¬Å"OPNâ⬠were found non-stationary, and were, therefore, stationarized at First difference level by using ADF Test. 5 . 3 TEST FOR AUTOCORRELATION Autocorrelation tells about the relationship between two or more error terms in the model. For unbiased estimation, autocorrelation must be zero. If there exists problem of autocorrelation, it has to be removed. For this purpose, two hypothesis are constructed : one, H0: Co-Var(u,u+1)=0,there is no autocorrelation between the error terms and second, Ha: Co-Var(u,u+1)not equal to zero, meaning there is a problem of autocorrelation. To check autocorrelation in our model, we have used Breusch-Godfrey Serial Correlation LM Test (BG TEST), as shown in table 5. 2. According to the table, probability of F-statistic is significant at 5%, so we reject the hypothesis that cov (ut, ut+1) is equal to zero. In other words, there is autocorrelation problem in our model. In order to remove the autocorrelation problem, we have applied ARMA model with autocorrelation through AR (1), AR (3) and MA (2). Breusch-Godfrey Serial Correlation LM Test:| F-statistic| 4. 781666| Probability| 0. 001241| Obs*R-squared| 20. 50376| Probability| 0. 002252| Probability of F-statistic is significant at 5%, so we reject the hypothesis that cov (ut, ut+1) is equal to zero. It means there is autocorrelation problem in our model. 5 . 4 ESTIMATION The results of the estimation with OLS are tabulated in Table 5. 3 below: Dependent variable:LPYMethod: Least Squares| Date: 03/25/12 Time: 11:13| | | | | | Variable| Coefficient| t-Statistic| Prob. | | GFCF| 0. 004693| 3. 806074| 0. 0006| | GINI| -0. 324275| -2. 919698| 0. 0065| | OPN| 0. 000254| 0. 468847| 0. 6425| | PRFR| -0. 000173| -0. 517278| 0. 6086| | TGDP| -0. 003194| -0. 809929| 0. 4242| | | | | | | R-squared| 0. 97793| Prob(F-statistic)| 0. 000000| Adjusted R-squared| 0. 997081| | | Durbin-Watson stat| 1. 705104| | | | | | | In the model ââ¬Ëââ¬â¢R^2ââ¬â¢Ã¢â¬â¢ shows strength of the regression line, which means how much important variables are covered by a model or how well variation in independent variables explains the variation in dependent variable. For time series analysis ââ¬Å"R^2ââ¬â¢Ã¢â¬â¢ value must be greater than 0. 70 or 70%, which means the model must explain at least 70% of the total variation in dependent variable. In our results, ââ¬Å"R^2=99%â⬠value is greater than 70%, so 99% of variation LPY is explained by our variables i. . GFCF, GINI, OPN, PRFR, TGDP. But the values in the 3rd column against each variable show ââ¬Å"tâ⬠values. If the t value, in absolute form, is greater than ââ¬Å"2â⬠, the relationship between the variables is significant. In our case, the financial autonomy is measured in terms of ââ¬Å"Ratio of Provincial share in Total Revenue (PRFR)â⬠, whereas the Economic growth is captured on the variable LPY. It is evident from the table that the relationship between LPY (dependent) and PRFR (independent) is insignificant because the ââ¬Å"devalues, in absolute form, are less than ââ¬Å"2â⬠. It implies that LPY is not influenced by PRFR. In other words, in Pakistanââ¬â¢s case, Fiscal decentralization has no bearing on economic growth. The model shows that GFCF and GINI with variables have ââ¬Ëââ¬â¢tââ¬â¢Ã¢â¬â¢ value greater than 2 in absolute form affect economic growth. Durbin-watson value in the table tells us about the problem of auto-correlation in the model. If the value of Durbin-watson test is between 1. 7 and 2. 2 there will be no auto-correlation. In our table its value 1. 7, so we say that the problem of auto-correlation has been removed. CHAPTER NO: 06 CONCLUSION This study focuses on identifying the impact of fiscal decentralization on economic growth through compilation of its historical trends. It is generally believed that that proper information about the existing fiscal decentralization system will lead to better policy formulation, which will ultimately put the country on the road to prosperity. In this regard, it is also worthwhile to analyze the implications of the current fiscal decentralization policy on the economic growth of the country. Thus, this study helps ascertain the extent of financial autonomy of the provinces and measures its long term benefits. In this study secondary data has been used, which covers the period from 1964 to 2008. Provincial share in total revenue (PRFR), GFCF- Gross fixed capital formation, Gini- Income inequality, OPN- Openness to trade (export+import/GDP), PRFR- Ratio of provincial shares in total revenue to total revenue, TGDP- Tax to GDP ratio are dependant variables, whereas LPY (Log of GDP) is dependent variable in the data. We used OLS model for our estimation, the results of which revealed that only GFCF and GINI have significant impact on GDP growth. On the other hand the influence of, OPN, TGDP and PRFR on economic growth (LPY) are insignificant. As PRFR and LPY measure the extent of fiscal decentralization and Economic growth respectively, we conclude that economic growth in Pakistan does not depend on fiscal decentralization. This may be due to the fact the Resource Distribution Formula has been mainly based on population. The results of other factors, included of late in the NFC Award, are yet to be seen. It is, therefore, proposed that not only the impact of population in the distribution formula be diluted by the inclusion of other factors, being emphasized by the smaller provinces, but also the powers of the provinces with regard to revenue generation be enhanced. ââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬â [ 1 ]. The words, Financial devolution, financial autonomy and Financial /fiscal decentralization are being used interchangeably in this study. [ 2 ]. In this discussion ,the words, federating unit, unit, province, sub-national government and low-level government will be used interchangeably. 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FISCAL DECENTRALIZATION AND ECONOMIC GROWTH IN PAKITAN A Thesis Submitted to the Faculty of Institute of Management Sciences, Peshawar In Partial Fulfilment of the Requirements for the Degree of MBA (Finance) (2009-2011) Institute of Management Sciences, Peshawar Chapter 1: Introduction According to James Edwin Kee, Fiscal decentralization is the devolution of certain administrative and fiscal powers and functions to the sub-national governments. It also means the shifting of responsibility to the low-level governments with concomitant accountability. The extent of Fiscal devolution can be measured in terms of the powers of low-level governments to raise revenue or to incur expenditures. We will write a custom essay sample on Fiscal Decentralization and Economic Growth in Pakistan or any similar topic only for you Order Now Fiscal devolution in the public sector has received great attention during the last two decades for many reasons. The implications of financial autonomy on the performance of sub level government and economic growth has been studied widely both for the developing and the developed world. In transition countries, with the disintegration of centralized system, fiscal federalism emerged; and in many developing countries, like India, Brazil and Argentina, financial decentralization was debated regarding its effects on economic stabilization. Some studies have, however, suggested that the relationship between the two has not been conclusive. [Financial devolution] is reckoned as a key policy tool that ensures economic efficiency and good governance through financial autonomy of the [federating units]. It leads to the integration of provinces and enhances their participatory role in the economic development of a country. It relieves the central government from paying attention to the details of financial matters, thereby enabling it to undertake the tasks at national level in a more effective and efficient manner. Also, if the central government for some reasons becomes inefficient, then devolution can be a possible solution. It accelerates growth and empowers the low-level governments through financial autonomy and administrative empowerment. The devolution makes the federating units more responsible as it brings the government closer to the people. Decentralization policy has a positive effect on economic growth as it helps implement social policies in a better manner. In decentralized set ups, the lower tiers of governments know more about the necessities and developmental needs of the people, which leads to economic efficiency in service delivery, thereby accelerating the growth rate at national and regional levels. This is also called the ââ¬Å"Oats Decentralization Theoremâ⬠. It says that if the people in one municipality are not provided with adequate public services, they may opt for shifting to other municipalities having more facilities. Financial autonomy reduces the wasteful utilization of resources by the central government. According to Bird and Smart (2002), for effective service delivery it is important that the recipient of funds has clear mandate, sufficient resources and powers to make decisions. Through decentralization, responsibilities as well as resources are devolved to the lower level governments (Rondinelli,1981). In this way , the federating units are empowered which enable them to use the resources to good effect , raise living standard of the people and distribute the work load (Gordin, 2004). In Pakistanââ¬â¢s case, the significance of Fiscal devolution cannot be overemphasized. Pakistan is a federation having a centralized taxation system. The major chunk of revenue is collected by the central government, which is then distributed among the provinces to remove financial disparities. Article 160 of the constitution empowers the president that he shall constitute National Finance Commission after every five years for the distribution of funds, taxes and other monetary assets among the federating units. The decision of the commission is called National Finance Commission Award. The commission is comprised of the finance ministers of the federation and the provinces and such other persons as may be appointed by the president in consultation with the governors of the respective provinces. So far, seven NFC Awards have been announced, the latest being the 7th NFC Award of 2010. Except for the 1974 Award, there has been a growing tendency in the transfer of revenue from the centre to the provinces. The 4th NFC Award was a significant move forward towards fiscal decentralization as it enhanced the share of the provinces by 18% and accepted their right over hydel profit, developmental surcharge and excise duty on crude oil. The 7th NFC Award accepted the demands of Baluchistan, KPK, Sindh by devising a formula, wherein poverty, inverse population density and under development have also been given due weightage. Moreover, the provincial share has been enhanced from the previous 47. 5% to 56%. The provinces were also given the powers to collect Sales Tax on their own. Following this decision, the Sindh Province has already undertaken this task and claims to have collected 50% more Sales Tax in the first five months of the financial year compared to the corresponding period last year [Dawn, Dec 10, 2011]. The 8th Financial Award is scheduled to be held on 16th Dec, 2011. Apart from the resource distribution Through NFC Award, Article 161 of the Constitution provides for transfer of Royalty on natural resources to the respective provinces in the shape of surcharge on gas and crude oil. This will lead to greater transfer of funds from the centre to the provinces. With the 18th Constitutional amendment, the concurrent list has been abolished, and with it entry No. 49 in the 4th Schedule to the Federal Legislative list has also been amended. As a result, the GST Services in Federal Excise mode have been assigned to the provinces. Despite the presence of this constitutional mechanism for resource distribution, the smooth allocation of funds was interrupted due to deadlocks among the provinces over the distribution formula, and, resultantly, the NFC Award failed to narrow down the vertical and horizontal resource gaps. At the district level, The National Reconstruction Bureau launched a decentralization programmed through Government Plan 2000, wherein it was acknowledged that without Fiscal Decentralization no authority is devolved, which further emphasizes the importance of transfer of funds to the lower tiers of government. The above paragraphs portray only one side of the picture. There are many studies which suggest that there is no direct relationship between fiscal devolution and economic growth and efficiency at the level of sub-national governments. As a matter of fact, there is also a strong case against the Fiscal federalism. It may lead to social inequalities as for instance, incomes and taxes may not be equitably distributed among the various regions of a country. Also, fixed costs are associated with running administrations of low-level governments. So, in low-income countries it may not be justified to spend substantial amount of the available funds on these expenses (Homme,1995). The relationship of Fiscal devolution and economic growth has been studied extensively in recent years. So, large volume of literature is available on the topic. Different relationships were studied to establish any clear relationship between Fiscal devolution and economic growth, but inconsistent results were obtained both for the developed and the developing economies. Some studies have shown positive relationship, others negative and still others no relationship at all between economic growth and fiscal autonomy. For Pakistan, too, studies have yet to find any clear relationship between financial decentralization and economic growth. Important contributions on this subject have been made by Zang and Zou(1998) ,Xie , Zou and Davoodi (1999) , Lin and Liu (2000) , Thieben (2001) , Martinez-Vazquez , McNab(2001) , Felenstine Iwata (2005) and Kardar (2006) etc. This study identifies strengths and weaknesses of the existing Resource Distribution System (RDS) through historical review. It is generally believed that that proper information about the existing RDS will lead to better policy formulation, which will ultimately put the country on the road to prosperity. In this connection, it is also worthwhile to analyze the implications of the current resource distribution policies on the economic growth of the country. Thus, this study helps ascertain the extent of financial autonomy of the provinces and measures its long term benefits. Rest of the study is arranged as follows: Chapter 2 pertains to Literature review i. e. study conducted previously by other researchers on this topic; In chapter 3 theoretical background and econometric methodology for our estimation is being discussed; chapter 4 discusses sources of our data and construction of variables; chapter 5 covers results and interpretation thereof results and chapter 6 is about the conclusion of research. Chapter 2 Literature Review 2. 1 Introduction In this chapter, we discuss the empirical studies related to our study i. e. work done previously by other researchers on this topic. 2. 2 Previous empirical studies The significance of relationship between the financial autonomy and economic growth can be gauged from the volume of literature available on this topic. Various important relationships were studied to establish clear relationship between the two, but inconsistent results were obtained both for the developed and the developing economies. For Pakistan too studies have yet to find any clear relationship between financial decentralization and economic growth. On leafing through the pages of available literature, one comes across valuable work on the topic, some of which is discussed in the following paras: Davoodi and Zou (1998) developed a theoretical model for studying the relationship between Fiscal autonomy and economic growth on the basis of averaged panel data of 46 countries. The study showed a negative relationship between the two for developing countries. Zhang and Zou (1998), while using Chinaââ¬â¢s provincial panel data for the period 1978-1992, found a negative association between provincial economic growth and the degree of financial autonomy over the past fifteen years. Philips and Woller (1997) studied the above referred relationship for seventeen developed and twenty three less developed countries on the data collected for the period 1974 to 1991. A negative weakly significant relationship was found for the developed world. However, no such relationship could be proved between the two variables for the less developed countries. Xie , Zou and Davoodi (1999) observed that there is a highly insignificant relationship between Fiscal Decentralization and economic growth for the United States, which the authors attributed to the fact that the country had already reached optimal level of fiscal autonomy and thus no further progress on this line was possible. Thieban (2001) made use of OECD countries cross sectional data for the period 1975 to 1995, but the study failed to establish any link between revenue decentralization of the low-level governments and economic growth of these countries. Martinez ââ¬âVazquez and Mc Nab (2001) concluded that the relationship between fiscal decentralization and economic growth is still unclear, and that little attention has been paid to indirect factors through which fiscal devolution may influence economic growth. In contrast to the above findings, Lin and Liu (2000), while using panel data of 28 provinces for the period 1970 to 1993, arrived at the conclusion that there exists a positive relationship between fiscal decentralization and economic growth in China. The authors noted that the impressive growth of china for the last twenty years can be linked to fiscal reforms. Ebel and Yilmaz (2001), observed that Fiscal design of OECD countries is unable to explain Fiscal decentralization in true sense. Martinez ââ¬âVazquez and Mc Nab (2003), on the basis of panel data, covering the period 1972-1997, studied the direct and indirect relationship between fiscal decentralization, economic growth and macroeconomic stability . They arrived at the conclusion that devolution minimizes the inflation rate, has no direct influence on economic growth, and has positive indirect effect on growth as it results in on macroeconomic stability. Justin Yifu and Zhiqiang (2000), investigated the implications of fiscal decentralization of economic growth in China, and found that it has made remarkable contribution to economic growth. This finding is in conformity with the hypothesis that Fiscal devolution enhances economic efficiency. Fielstentein and Iwata (2005), while using VAR (Vector Auto regressive) model found that there is a relationship between decentralization and macro economic performance in China. They concluded that Fiscal decentralization is positively related to growth in the period after the war, and has negative effects on the inflation rate after the 1970s. While using the cross country data for 78 countries, Mello and Barenstein (2001) observed that as the share of receipts, including non-tax revenue, grants and transfer of funds, from the federal government increases in the total provincial revenues, the relationship between financial devolution and governance grows stronger. Shah (1991) pointed out that poor performance in most of the developing countries in the last 40 years can be attributed to highly centralized regimes. Huther and Shah (1998) noted that good governance and fiscal decentralization are positively related, which in turn may enhance economic growth. Akai and Sakata (2002) used single country data and predicted that fiscal decentralization plays a role in economic development. They pointed out that in the United States, high government spending was required in the initial phases of economic development, therefore, any analysis that took into consideration this period is bound to overestimate the role of central government in the economic development. This led Xie et al (1999) to declare that decentralization has adverse effect on economic development. Jorge Martinez-Vazquez and Mark Rider (2006) pointed out the structure of financial system plays a pivotal role in determining the conduct and performance of low-level governments, which indirectly influence economic growth of a country. According to them, though both China and India show great financial decentralization, the central governments restrict the fiscal autonomy of the sub-national governments through conditional grants and inadequate powers to raise revenue. Thus, the regional governments are forced to use extra budgetary allocations to overcome their financial constraints, which results in waste of resources. These structural infirmities in the financial systems entail profligacy and unproductive expenditure policies, which may hamper the growth rate in the future in both the countries. Nobuo Akai, Yukihiro Nishimura and Masayo Sakata (2007), while using panel data of the fifty states of the US, showed that fiscal decentralization minimizes the variance of GDP growth due to decentralization among various levels of government. They also observed that there exists a negative relationship between fiscal devolution and economic volatility. Hiroko Uchimora and Yurika Suzuki (2009) studied Fiscal Decentralization in the Philippines after the promulgation of Local Government code (1991) . This study examined the fiscal relationship between the central and sub national governments by using the indicators of Fiscal decentralization. According to their findings, in the Philippines, the responsibility to incur expenditures by the local governments is not accompanied by corresponding strengthening of the fiscal capacity. As a result, local governments rely heavily on fiscal transfers from the central government and Internal Revenues Allotment, which render the local finance unstable. Atushi Alimi(2004) Although , in theory, decentralization promises efficient provision of public services at local level, empirical evidence gives a mixed picture regarding its implications on economic growth. They attempted to resolve this inconsistency by using instrumental technique on the data for the period 1997 to 2001. In this study, fiscal decentralization is measured in terms of the ratio between local expenditure to total government expenditure. The result showed a significant positive relationship between per capita growth rate and Fiscal decentralization. Perraton, J. and Wells, p. (2003), in their paper, ââ¬ËMulti level governance and Economic cohesionââ¬â¢ noted three general trends in economic policy making: the transfer of powers to supranational institution in economic policy formulation, e. g. he formation of the European Union and World Trade Organization; secondly, almost all developed countries have established regional organizations, to which powers of economic policy-making have been devolved. In the transition states, there is a growing tendency towards decentralization to curtail expenditures and to make the governments more accountable; thirdly, the governments are now inclined to reduce their sizes and make alternate arrangements for governance through NGOs. This concept o f governance is referred to as multi-level governance. In Pakistanââ¬â¢s case, Fiscal Federalism has been studied in detail. According to Anwar Shah, World Bank (Dec, 2006), there are two ways of transferring funds from the Centre to the provinces: assigning share of the federal revenues to the provinces at a pre-determined rate and direct transfer of funds (other than revenue) from the Centre to the provinces. According to him, the revenue sharing system in Pakistan affects the transfers in a lump sum and predictable manner to the federating units, which are at liberty to use these funds the way they choose. The author further argues that NFC places greater responsibility of revenue collection on the Federal government, thereby making the tax machinery efficient and tax compliance cost effective. The Revenue sharing system may have its merits, but it is also associated with certain demerits. For example, the provinces enjoy vast discretion in the utilization of funds, but have no control over the amount of funds they receive from the centre ; the federal government cannot influence the provinces to set priorities for achieving uniform standards in reas like health and Education; the provinces receive the funds without any strings attached to it , therefore, they feel less accountable while spending the funds; the share received by the provinces have no relation with the expenditures they incur, as usually the expenditures outgrow the rate at which the Federal revenue grows. Nighat Bilgrami and Mahpara Sadaqat (2006) have given an account of evolution and working of NFC Award ever since i ts introduction in 1951. According to the authors, with the exception of 1974 Award, there is a growing tendency in increase of revenue transfer to the provinces. The major step forward in this direction was the 1991 NFC Award, wherein new taxes were included in the divisible pool. In addition, as envisaged in Article 161 of the Constitution, royalty on crude oil and surcharge on gas were also transferred to the provinces. This caused greater decentralization of funds, which over a period of time played a pivotal role in improving service delivery in health, education and irrigation etc sectors. The paper identifies various forms of fund transfers from the Federal government to the provinces. These include Revenue Sharing Transfers, Straight transfers, Recurring Grants, Development Grants and loans. The authors have also elucidated that how resources are transferred in Pakistan from the federal government to the provinces in four ways: from the centre to the provinces, from provincial to local governments, from the federal government to the local governments and from local to local governments. The paper also gives a rationale for transfers of resources from the federal to provincial and municipal governments. At the end of the paper, the authors have suggested that smaller provinces be provided with soft loans and factors like backwardness and poverty be also considered while allocating the resources. Moreover, the provinces should be allowed to generate revenues that fall within their domain. Iftikhar Ahmed, Usman Mustafa and Mahmood Khalid (2007) have dilated upon the evolution of resource distribution over time. According to them the divisible pool has been expanded by the inclusion of more taxes. However, as population is the sole criteria for the distribution of resources through NFC awards, it has given birth to serious differences among the provinces. The paper says that resources are transferred from the centre to the provinces in two ways: Systematic or Formula Based transfer, comprising of revenue sharing and Random transfer, including grants, executive discretionary funds and Parliamentarian funds etc. According to the authors, with the passage of time the federal government has become more centralized, thereby adversely affecting the efficiency of the provincial governments. The federal government has got engaged in activities that purely fall within the purview of provinces. These include irrigation, roads, culture, tourism, youth affairs etc. This has increased the burden on federal government. The Federal government collects 93 % of the revenue but expends only 72%, whereas the provinces generate just 7% but spend 28%. The argument behind greater revenue collection by the centre is that it is more efficient in revenue collection than the provinces. But this argument is flawed as the provincial and local governments are left with lesser opportunities to collect revenue. This results in the dependency of the provinces on the federal government for transfer of resources. In this paper, NFC Award has also been criticized in that the criteria for resource distribution are mainly population. Elsewhere in the world, other factors like backwardness, population density, and revenue generation are also considered while devising a formula for distribution of resources. According to the authors, the major shift towards fiscal decentralization appeared in the 1996 NFC Award, whereby all duties and taxes were included in the divisible pool. By so doing transparency and predictability in resource distribution was though enhanced, yet the resource distribution formula between the federal and provincial governments changed little. The paper says that resources distribution has never been taken seriously. Only one criterion, that is population, has been followed for resource distribution, thatââ¬â¢s why the NFC Award has failed to resolve the problem of Fiscal Decentralization. Usman Mustafa (2011) has highlighted the importance of federal form of government and has argued that even European Union has the characteristics of federalism. While referring to works of notable authors on the subject, it has been argued that Fiscal Decentralization increases efficiency, transparency and accountability. According to the author, in Pakistanââ¬â¢s case, there are pre-federalism (from 1947-71) and post federalism (from 1973 onwards) periods. In the first perid, the authority was centralized (one unit), whereas the second period is characterized by the march towards decentralization of powers from the centre to the provinces. In this context, the author argues that NFC Award is a step forward towards decentralization. He, however, criticizes population being suitable criteria for resource distribution between the centre and the provinces. In order to remove the grievances of the smaller provinces, a historical decision was taken in the 7th NFC Award on Dec, 2009 at Gawadar, to which all the provinces agreed. In this award, the demands of the smaller provinces were accepted, and a multifactor formula was devised. In the formula, factors like poverty, underdevelopment and inverse population density were also included for resource distribution. Moreover, the Federation sacrificed more that 10% of its share in favour of the provinces. It was also agreed that collection charges received by the Federal government on revenue would be curtailed from the existing 5% to 1%. This will increase the volume of net transfer of revenue from the federal to the provincial governments. All these decisions taken in the 7th NFC Award will contribute favourably towards Fiscal Decentralization in Pakistan. According to Kardar (2006), local governments have significance both in the context of Devolution plan and failure of central and provincial governments to deliver quality services to the masses ever since the emergence of Pakistan. He further argued that though legislation on devolution is a landmark achievement, the biggest challenge is to settle the row over powers between the provinces and district governments. Dr. Shahnawaz Malik, Mahmood-ul-Hassan and Shahzad Hussein analyzed the relationship between Fiscal decentralization and economic growth for the period 1971-2005. They obtained mixed results on the basis of different variables used in analysis. The study further showed that with the continuous rise in the share of provincial government revenues and expenditures, economic growth slows down. Naeem-ur-Rehman Khattak, Iftikhar Ahmed and Jangraiz Khan, while using time series data, for the period 1980 to 2007, analyzed the resource distribution, and studied the impact of financial decentralization on the economic growth of Pakistan. According to them, the divisible pool has expanded over the years by the inclusion of more taxes in it. They pointed out that the resource distribution mechanism failed to affect economic growth positively, and suggested that the distribution formula be revisited, having regard to factors like tax collection and backwardness of the provinces. They further suggested that more powers be delegated to the provinces to raise their own revenues. Chapter 3 THEORETICAL BACKGROUND AND ECONMETRIC METHODOLOGY 3. 1 Introduction In this chapter we discuss the theory which guides our research, variables of our model, type of statistical relationship and the model we will use for estimation. 3. 2 THEORETICAL BACKGROUND Various forms of Decentralization. It refers to the delegation of powers and functions from the central to low-level governments. There are three main forms of decentralization (JICA 2008): . 2. 1. Decentralization It is the weakest type of decentralization, and refers to the transfer of decision making powers along with financial and management responsibilities from the officials in the centre to those serving in the local /regional offices. 3. 2. 2. Delegation Here the powers are delegated to the autonomous bodies, including corporations, housing authoritiesââ¬â¢ etc. , working under the supervision of the central go vernment. These organizations enjoy vast discretion and decision making powers. 3. 2. 3. Devolution It is the gradual transfer of administrative, financial and political authority to the local bodies, which exercise their powers and functions within certain geographical confines. It has three main constituents, as discussed below: a) Political decentralization It refers to the shifting of powers and authority to local bodies, run by local political representatives. It has a well-established system of political decision-making and accountability at the local level. b) Administrative decentralization It is the form of devolution whereby staff of line ministry is dissociated from their corresponding ministries and brought under the control of the local administration. This is done through establishing local pay roll, which empowers them to reward and punish the staff. c) Fiscal decentralization It refers to the shifting of authority and responsibility to the sub-level governments with regard to decision-making on distribution of financial resources. This also includes the powers to raise local revenue. Fiscal decentralization has attracted great attention, among the economic circles, especially for improving service delivery at the local level. The main objectives of Fiscal decentralization include efficient utilization of resources, effective service delivery, macroeconomic stability and economic growth. With these objectives in view, the developing world is following the principle of Subsidiarity, which emphasizes that authority should rest with the lower tiers of government for effective use, and that the responsibility of incurring expenditures should match with adequate financing. Decentralization leads to efficient utilization of funds through improvement in governance, as lower strata of government can better assess peopleââ¬â¢s problems and know their priorities. Decentralization enhances participation of local population as the beneficiaries are directly involved in planning the allocation of funds. Increased decentralization gives birth to democratization, which keeps the government close to the masses, thereby making it more accountable. 3. 3 Various theories regarding decentralization The above narrated advantages, and many more not discussed here, emphasize the importance of Fiscal decentralization. But it was since the publishing of Tieboutââ¬â¢s article, ââ¬Å"A pure theory of local Expenditureâ⬠that this concept has gained great popularity among the theorists, and the volume of literature on this topic has increased tremendously. According to Tibeout (1956), Fiscal decentralization improves production efficiency through greater mass mobilization. In 1959 Musgrave pointed out that the role of government is to bring stability to the market and effect the redistribution of income. He further argued that efficient utilization of resources can be secured only when local tastes and choices are taken into consideration. Oates (1972) pointed out that people living in different localities have peculiar tastes and preferences for public service, therefore, local governments, as against central government, being better informed, will provide better services to its citizens. This concept is called Oates ââ¬Å"Decentralization Theoremâ⬠, according to which economic efficiency can be enhanced by decentralizing the availability of public goods and services. Thus, the central government should be responsible for devising a national policy and providing efficient levels of government for distribution of goods . (Oates,2005) So, equipped with the requisite paraphernalia , the sub-national governments are in a better position to put in place welfare-maximizing policies. Cremer, Estach and Seebright (1994), stated that government at the centre cannot reach the information about local tastes and choices. Thus, it is through Fiscal Decentralization that local agents can bring about efficient supply of goods and services to their constituencies. Almost identical views were expressed by Qian and Weingast (1997), who opined that decentralization puts a check on budget expansion by promoting competition and strengthening accountability, which effects supply of goods and services in an efficient manner. Having said this, there is always a tendency among the local political agents to enlarge the scope of public goods and services at the cost of other jurisdictions. Rodden (2003) attributed this predilection to the type of decentralization being followed. If decentralization is dependent on self-generated tax revenue, smaller governments emerge; and if transfer of funds occurs from the centre, it results in budget expansion. Though from economic and political point of view there are many benefits of Fiscal decentralization, yet it is not a cure for all ills. For instance, Fiscal Decentralization entails loss of Economies of Scale and loosens control over scarce resources. From it follows that centralization and Decentralization are not alternatives, rather the countries should find a balance between the two as per their requirements. . 4. Rationale for Fiscal Transfer in Pakistan The first reason is the general perception that the federal government is better equipped to collect major taxes, but is inefficient to collect smaller taxes. Also, the federal government may undertake major projects, but fail to deliver on smaller projects. Hence, the efficiency criteria must be followed while deciding allocation of means and responsibilitie s. The second reason for resource transfer from the centre to the provinces is that the latter lack the resources to finance the provision of even basic services. In the last ten years, the average revenue generated by the centre, provinces and municipalities stand at 89%, 5% and 6% respectively. As against the revenue generation, the share in recurring expenditure of the federal, provincial and municipal governments is 74%, 23% and 4% respectively. As regards developmental expenditure, the share of these governments is as follows: Federal government 65%, provincial government 25% and municipal governments 6%. These figures indicate that the provinces have limited resources vis-a-vis the amount of expenditure they incur. This necessitates the transfer of resources from federal to lower-tiers of government. Another reason that can be attributed to the allocation of resources among the different levels of government is Adequacy of Revenue. This concept refers to the capability of government not only to generate the initial revenue required to start a project but also to its ability to sustain it. In Pakistanââ¬â¢s case, Adequacy of revenue does not exist; hence transfer of resources to the lower tiers of government is necessary if they are to undertake any such projects. The fourth reason of transfer funds from the centre to the provinces is that there are taxes which though provincial in nature but is collected by the federal government, for example Sales Tax. Another rationale for transfer of funds is that federal government uses certain taxes for the overall stabilization of the economy; hence they should be under the control of the federal government. [NFC AWARDS Commentary and Agenda, Nighat Bilagarami, Jaffery and Mahpara Sadaqat (2006)]. 3. 5 ECONMETRIC METHODOLOGY 3. 5. 1Augmented Dicky Fuller (ADF) Test In this study a time series data is being used. Since this kind of data is usually non-stationary in nature, we first test it for stationarity or non-stationarity. For this purpose, an enhanced version of Dicky fuller Test, known as Augmented Dicky Fuller Test, is being employed. The ADF includes extra lagged terms of the dependant variable so as to remove auto-correlation. The following equations denote the three possible forms of ADF Test. i) Without any constant and trend ?yt=? *yt-1+i=1p? i? yt-i+et ii) Constant with non trend ?yt=a+? *yt-1i=1p? i+? yt-1+et iii) Constant with trend ?yt=a+? t+? *yt-1+i=1p? i+? yt-1+et Of the above equations, (iii) represents a more generalized form of ADF Test. Mackinnon(1991) gave critical values for the DF test The critical values for the ADF Test are the same as those for Dickey Fuller Test. If the DF Statistical value is smaller than the critical value, Null hypothesis of a unit root is rejected, which suggests that the yt is stationary process or the variables are stationary. If on running the ADF Test the variables are found non-stationary in their original levels of series, the variables are made stationary in their first difference level of the series. . 5. 2 Ordinary least square model (OLS) Once the variables are made stationary, estimation is made by employing Ordinary least square model (OLS). This model is suitable for ascertaining linear interdependencies in a time series data. Here it is also worthwhile to discuss Regression model. A multiple linear regression model estimates value of dependant variable (also called response variable) on the basis o f independent variables (also called explanatory variables). But there is always a difference in estimated and observed values. Therefore, a Regression model also possess unexplained variable, also called error term, which measures the difference between observed and estimated values. y= b+b1 x1+ b2 x2+ b x3 â⬠¦Ã¢â¬ ¦ +ei A regression model will be ââ¬Å"best fitâ⬠if the difference between observed and estimated value is minimum. We cannot take error term by simply adding all the difference between observed and estimated value because it may contain both positive and negative values which can cancel the effect of each other. So, we take the square of error terms which leads us to OLS . i. e. minimum squared difference. OLS is useful for structural inference and policy analysis. For the purpose of Structural Analysis of data, certain assumptions regarding the causality of data are made. These are : error term (i) is normally distributed (ii) has zero expected value of mean (iii) has constant variance in each time period and for all values of X and (iv) its value in one time period is unrelated to its value in another time period. OLS is a very simple technique by which we can calculate the coefficient of each variable in other words it gives us the impact of one variable on another variable, which is summarized by impulse response function. | | | | | Chapter 4 DATA AND VARIABLE 4. 1 INTRODUCTION This chapter covers how data is collected, what are sources of our data and how variables have been constructed variables for our estimation. 4. 2 Data type For the purpose of studying the relationship between Fiscal decentralization and economic growth, secondary data is being utilized. 4. 3 Sources of data For the purpose of this study the following sources have been utilized. i) Issues of ââ¬Å"Economic survey of Pakistanâ⬠ii)World Development Indicators iii)Ten years in Pakistan Statisticsâ⬠(1983) iv)UNDP Human Development Report, 2007. )Hand book of Statistics on Pakistan Economy (2005)â⬠4. 4 Construction of variables Economic growth of the country is taken as dependant variable. It is measured in terms of per capita Log of per capita gross domestic product (LYP), which is rebased by the year 2000 market prices. The variable is expressed in real terms using GDP deflator to ascertain the pattern of economic growth over the years. The Fiscal decentralization is captured on the ratio of Provincial share in Total Revenue to the Total Revenue (PRFR). The data source for these variables is ââ¬Å"Economic survey of Pakistan and covers the period from 1964 to 2008. As regards investment, it is captured by the Gross Fixed Capital Formation (GFCF) and data is taken from ââ¬Å"Pakistan Economic Surveyâ⬠Moreover, a variable for trade openness (OPN) is also used in the estimation model. This variable is obtained by adding imports and exports and dividing the same by LYP (at market prices). Here, too, the source of data is ââ¬Å"Economic Survey of Pakistanâ⬠Other variables in the estimation model are Tax to GDP ratio (TGDP) and GINI co-efficient, the latter being used to calculate income equality and its source is UNDP Human Development Report. Chapter 5 RESULTS AND DISCUSSION . 1 INTRODUCTION The section consists of results and their interpretation. In para 5. 1, 5. 2 and 5. 3 Stationarity of data, Autocorrelation and the results of OLS model respectively have been discussed. 5. 2 Unit Root test In a time series data, the major problem is the non-stationarity of variables. So, before estimation, a test is applied to make the variables stationary. For this purpose various tests can be employed, but in our case we have used Augmented Dickey Fuller test, the results of which are shown in table 5. 1 below. Table 5. 1 UNIT ROOT TEST| Non stationary variables| ADF-value| 5% Critical value| Gfcf| -1. 693492| -2. 9303| Gini| -2. 462911| -2. 9303| Lpy| 0. 863730| -2. 9303| PRFR| -2. 206432| -2. 9303| TGDP| 0. 158213| -2. 9303| Stationary variables| | ADF-value| Critical value| Gfcf| -3. 997577| -2. 9320| Gini| -4. 766215| -2. 9320| Lpy| -4. 632922| -2. 9320| OPN| -3. 453532| -2. 9303| PRFR| -3. 662186| -2. 9320| TGDP| -3. 01612| -2. 9320| Gfcf- Gross fixed capital formation, Gini- Income inequality, Lpy- Log of GDP, OPN- Openness to trade (export+import/GDP), PRFR- Ratio of provincial shares in total revenue to total revenue, TGDP- Tax to GDP ratio. At the level, all the variables except ââ¬Å"OPNâ⬠were found non-stationary, and were, therefore, stationarized at First difference level by using ADF Test. 5 . 3 TEST FOR AUTOCORRELATION Autocorrelation tells about the relationship between two or more error terms in the model. For unbiased estimation, autocorrelation must be zero. If there exists problem of autocorrelation, it has to be removed. For this purpose, two hypothesis are constructed : one, H0: Co-Var(u,u+1)=0,there is no autocorrelation between the error terms and second, Ha: Co-Var(u,u+1)not equal to zero, meaning there is a problem of autocorrelation. To check autocorrelation in our model, we have used Breusch-Godfrey Serial Correlation LM Test (BG TEST), as shown in table 5. 2. According to the table, probability of F-statistic is significant at 5%, so we reject the hypothesis that cov (ut, ut+1) is equal to zero. In other words, there is autocorrelation problem in our model. In order to remove the autocorrelation problem, we have applied ARMA model with autocorrelation through AR (1), AR (3) and MA (2). Breusch-Godfrey Serial Correlation LM Test:| F-statistic| 4. 781666| Probability| 0. 001241| Obs*R-squared| 20. 50376| Probability| 0. 002252| Probability of F-statistic is significant at 5%, so we reject the hypothesis that cov (ut, ut+1) is equal to zero. It means there is autocorrelation problem in our model. 5 . 4 ESTIMATION The results of the estimation with OLS are tabulated in Table 5. 3 below: Dependent variable:LPYMethod: Least Squares| Date: 03/25/12 Time: 11:13| | | | | | Variable| Coefficient| t-Statistic| Prob. | | GFCF| 0. 004693| 3. 806074| 0. 0006| | GINI| -0. 324275| -2. 919698| 0. 0065| | OPN| 0. 000254| 0. 468847| 0. 6425| | PRFR| -0. 000173| -0. 517278| 0. 6086| | TGDP| -0. 003194| -0. 809929| 0. 4242| | | | | | | R-squared| 0. 97793| Prob(F-statistic)| 0. 000000| Adjusted R-squared| 0. 997081| | | Durbin-Watson stat| 1. 705104| | | | | | | In the model ââ¬Ëââ¬â¢R^2ââ¬â¢Ã¢â¬â¢ shows strength of the regression line, which means how much important variables are covered by a model or how well variation in independent variables explains the variation in dependent variable. For time series analysis ââ¬Å"R^2ââ¬â¢Ã¢â¬â¢ value must be greater than 0. 70 or 70%, which means the model must explain at least 70% of the total variation in dependent variable. In our results, ââ¬Å"R^2=99%â⬠value is greater than 70%, so 99% of variation LPY is explained by our variables i. . GFCF, GINI, OPN, PRFR, TGDP. But the values in the 3rd column against each variable show ââ¬Å"tâ⬠values. If the t value, in absolute form, is greater than ââ¬Å"2â⬠, the relationship between the variables is significant. In our case, the financial autonomy is measured in terms of ââ¬Å"Ratio of Provincial share in Total Revenue (PRFR)â⬠, whereas the Economic growth is captured on the variable LPY. It is evident from the table that the relationship between LPY (dependent) and PRFR (independent) is insignificant because the ââ¬Å"devalues, in absolute form, are less than ââ¬Å"2â⬠. It implies that LPY is not influenced by PRFR. In other words, in Pakistanââ¬â¢s case, Fiscal decentralization has no bearing on economic growth. The model shows that GFCF and GINI with variables have ââ¬Ëââ¬â¢tââ¬â¢Ã¢â¬â¢ value greater than 2 in absolute form affect economic growth. Durbin-watson value in the table tells us about the problem of auto-correlation in the model. If the value of Durbin-watson test is between 1. 7 and 2. 2 there will be no auto-correlation. In our table its value 1. 7, so we say that the problem of auto-correlation has been removed. CHAPTER NO: 06 CONCLUSION This study focuses on identifying the impact of fiscal decentralization on economic growth through compilation of its historical trends. It is generally believed that that proper information about the existing fiscal decentralization system will lead to better policy formulation, which will ultimately put the country on the road to prosperity. In this regard, it is also worthwhile to analyze the implications of the current fiscal decentralization policy on the economic growth of the country. Thus, this study helps ascertain the extent of financial autonomy of the provinces and measures its long term benefits. In this study secondary data has been used, which covers the period from 1964 to 2008. Provincial share in total revenue (PRFR), GFCF- Gross fixed capital formation, Gini- Income inequality, OPN- Openness to trade (export+import/GDP), PRFR- Ratio of provincial shares in total revenue to total revenue, TGDP- Tax to GDP ratio are dependant variables, whereas LPY (Log of GDP) is dependent variable in the data. We used OLS model for our estimation, the results of which revealed that only GFCF and GINI have significant impact on GDP growth. On the other hand the influence of, OPN, TGDP and PRFR on economic growth (LPY) are insignificant. As PRFR and LPY measure the extent of fiscal decentralization and Economic growth respectively, we conclude that economic growth in Pakistan does not depend on fiscal decentralization. This may be due to the fact the Resource Distribution Formula has been mainly based on population. The results of other factors, included of late in the NFC Award, are yet to be seen. It is, therefore, proposed that not only the impact of population in the distribution formula be diluted by the inclusion of other factors, being emphasized by the smaller provinces, but also the powers of the provinces with regard to revenue generation be enhanced. ââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬âââ¬â [ 1 ]. The words, Financial devolution, financial autonomy and Financial /fiscal decentralization are being used interchangeably in this study. [ 2 ]. In this discussion ,the words, federating unit, unit, province, sub-national government and low-level government will be used interchangeably. How to cite Fiscal Decentralization and Economic Growth in Pakistan, Essay examples
Tuesday, May 5, 2020
Dietary Factors Associated With Reflux and Risk of Adenocarcinoma
Question: Discuss about the Dietary Factors associated with reflux and Risk of Adenocarcinoma of the Esophagus and Gastric Cardia. Answer: This paper explains the relationship between dietary factors and risk of adenocarcinoma of the esophagus and gastric cardia. It is a discussion to review evidence that dietary factors have a direct influence on the risk of having adenocarcinoma esophagus and gastric cardia. Adenocarcinoma esophagus is a type of oesophageal cancer that mostly affects the white men in the United States. Gastroesophageal reflux was recorded as the most known risk factor for adenocarcinoma esophagus (Houghton, Mangnall Read, 1990). For those who have had the severe symptoms for a long period of time, the risk may be more than forty-fold. GER has been observed to cause an increase of risk of gastric cardia exceeding forty-fold. Various foods, including chocolates, coffee, tomatoes, dietary fats, mints, citrus fruits, and onions have been assumed to have a strong relationship with temporary reflux mostly because of relaxation of LES. The aim of this paper was to ascertain whether it is true that the above-mentioned foods have an association with risk of gastric cardia and adenocarcinoma esophagus. The intakes of these foods and other potential dietary behaviours were studied in a population-based study that targeted the whole nation. The design used was that of case-control with an initial 185 participants with adenocarcinoma esophagus and 258 participants with gastric cardia and a control group of 815 participants. The study was based on Sweden population that is the native Swedish people of ages below eighty years old, who were living in the country between the 1st of December 1994 and the 31st of December 1997. The people who were considered to take part in the study were the patients found to have the adenocarcinoma esophagus as well as those that had gastric cardia. A comprehensible organization including all important departments of the hospital made it possible to have a quick and credible case study. The results were arranged anatomically and histologically which were then analyzed by the pathologist of the study. Throughout this study, control participants were selected in a random manner from the population of the ancient Sweden people while making a consideration to maintain the gender distribution as well as the age distribution as in the cases that were already selected before. The participants who dropped out of the study were 27 participants or 12,5% of the participants who were suffering from adenocarcinoma esophagus and 51 participants or 16.3% of participants who were suffering from cardia cancer. This nonparticipation was caused mainly by 66 patients or b4.6% of the total participants having very poor clinical health or even sudden death immediately after they were diagnosed with the adenocarcinoma esophagus or cardiac cancer (Blot, Deresa, Kneller Fraumini, 1991). Nonparticipation from the patients in the control group was 308, which was 27% of the total number of people in the control group and this was attributed to majorly the patients' not willing to take part in the study. There were seven participants who were dropped out of the study because their total intake of energy was more than 3SDs from mean energy intake, which resulted in their dietary responses having a lot of errors. Other three more participants were excluded because they did not have information about their Body Mass Index and a further two participants were excluded from the study because they were not responding appropriately to the given questions about their diet. After all these exclusions there were 185 participants suffering from adenocarcinoma esophagus, 258 cases of cardiac cancer and 815 participants for the control group. All the participants went through a computer-aided interview. The interviews were conducted by professional interviewers who came from the Statistics Sweden and were carried out face to face. A structured questionnaire examining food frequency, which is a modified version of food frequency questionnaire that was evaluated before, that included 63 beverages and food items, was used to examine the dietary behaviours of the interviewee for 20 years before that interview. The period of 20 years was chosen so as to enable the examination of risk factors with an adequate time that could cover the period of time when the cancer symptoms were still not evident. The interviewers asked the number of times each food or beverage item was consumed per day, per month and even per year., the exact time the participants usually took their last meal of the day every day and the amount of food eaten per different serving throughout a day, this was aided by showing pictures of common different portions of the seven Swedish dishes. The relationship between food items and reflux symptoms was first analyzed for the patients in the control group. The coefficient of correlation of Spearman was used to analyze the relationship between the variables in diet and the harshness of reflux in the patients who were in the control group. The regression of unconditional logistics was used in the multivariate modelling and univariate modelling (Allen, Mellow, Robinson Orr, 1990). All the multivariate models had inclusion of gender, age, Body Mass Index (divided according to the distribution in the control group), the alcohol intake in terms of energy content of the alcohol measured in grams taken in every week, total intakes of vegetables and fruits and the smoking of cigarette, if they have smoked in the past, if currently smoking and if they have never smoked. The median age of the patients in study groups was 67 years. The median age of the patients in the control group was 68 years. The study group was made up of 86 per cent males and 14% females. The control group was made up of 83 per cent males and 17% females. The number of participants with a history of smoking tobacco was lowest among the participants in the control group while the numbers were larger in the participants of the study group suffering from adenocarcinoma esophagus and the number of participants with a smoking history being largest in the patients with gastric cardia. There was slightly more participants who registered alcohol drinking in the study group of patients with cardiac cancer compared to the participants in the group or the group of patients suffering from adenocarcinoma esophagus. The medians of ten dietary factors were shown to be related to LES relaxation in participants in the control group under laboratory setting were found to be same among patients who with self-supported symptoms or without these self-supported symptoms within 5 or more years prior to the time the interview took place. The levels of the mean of the factors were also same in these two groups. The severity of reflux and Spearman's correlation of the ten dietary factors among patients suffering from reflux had a very small magnitude and all the coefficients had no visible statistical differences. The estimated relative risk for the two types of cancer when there is exposure to the various conditions was tabulated. A statistical insignificant 40% increase in the risk of gastric cardia was seen between the intake of highest tertile of chocolate and the intake of lowest tertile of chocolate. In the cases of adenocarcinoma esophagus no noticeable trends were registered, however, an insignificant decreased risk of adenocarcinoma esophagus was noticed when there was increased consumption of leeks, onions, and garlic. The amounts of food taken per serving and the time these foods were taken on a daily basis were found to have no relationship whatsoever with risks of the two types of cancer studied in this paper. Different adjustments made in the variable did not change the results (Szarka. Locke, 1999). In this study of random samples of participants from the adults from Sweden population, the recurring self-supported symptoms in the participants within five or even more years before the interviews were not taken to be related to dietary behaviours of these participants that had already been associated with the low mean basal pressure of LES or dyspepsia. In addition, the said factors were not taken to be related to the risks of gastric cardia and adenocarcinoma esophagus. From the study, it is concluded that no association was registered between dietary habits and the risk of the two types of cancer. There could be many explanations as to why these findings did not bring out an association between gastric cardia and adenocarcinoma esophagus and the dietary factors as was found in the laboratory experiments. The first explanation could be that the intake of the foods that brought about relaxed LES or the temporary GER in the experiments carried out in the laboratory might not have been in sufficient quantities or might not have been in enough frequency to bring about a significant condition of chronic reflux. IN most of these previously performed experiments, however, used moderate size portions, which was same as the portion taken as one portion in this study, to experiment the possible association between dietary habits and reflux symptoms. The second possible explanation would be that the temporary reflux that is induced by these laboratory set exposures may be very different from actual severe reflux characterized by inflammation that comes with the GER disease (Zhang, Kurtz, Yu, Sun, Gargon, 1997). It is understood that the regurgitation caused by food is very much less harmful compared to the transient LES relaxations- associated episodes of reflux, which usually happens when there are no neutralizing agents in a person's stomach. It is has been observed that people who are likely to have reflux take in small amounts of those foods that are speculated to be causing the reflux symptoms, therefore, making the relationship between these foods and symptoms of reflux very week. The absence or presence of GERD does not make it impossible to test the hypothesis that the intake of foods which are known for their ability to bring about LES relaxation increases the risks of adenocarcinoma esophagus because reflux that is associated with transient LES relaxers could be asymptomatic. Furthermore, the foods that are known to promote reflux, for example, citrus fruits, onions, and garlic, may have the anticarcinogenic properties that annihilate the effects of reflux. Therefore the results did not necessarily nullify the strong relationship between the frequency of reflux as well as the severity of reflux and risk of adenocarcinoma esophagus and gastric cardia. Although the findings show that the general consumption of the foods that promote reflux should not be a concern of public health in the larger population according to the explanations done above. Studies of the relationship between dietary habits and adenocarcinoma and gastric cardia have not been frequent or a common study. There were four studies that had already previously been done in the design of control and case studies, which studied some aspects of dietary habits and their relationship with these two cancers (Cohen Booth, 1975). In three out of the four studies, the participants with both adenocarcinoma esophagus and gastric cardia were combined to form a single group for study and there was no separate presentation of results for adenocarcinoma esophagus patients and gastric cardia patients. The fourth study only the patients with adenocarcinoma participated in the study and the patients with gastric cardia were not included. The mentioned differences plus differences in the number of participants in those four studies and the study recorded in this paper makes it difficult to make comparisons between the data in the four previous studies and the data from this study. The estimated consumption of citrus fruit in this study was however similar to those recorded by Zhang and his colleagues. An uneven but statistically significant association between intake of fat and the risk of adenocarcinoma esophagus was registered in the latter study which was not observed in the study described in this paper (Kabat, Ng Wynder., 1993). The observation by Kabat and colleagues that there was a significant and positive relationship between total intake of fat in men and risk of combined adenocarcinomas was consistent with the findings of the study in this paper but were contradictory to what both Brown and colleagues and Tzonous and colleagues observed. The strength of this study lies in the fact that it was based on a larger population (Szarka Locke, 1999). All recently diagnosed cases in the base of the study were identified and they were thoroughly categorized in accordance with the site of the tumor and the histological type. This relatively broad study enabled the analysis of the two different types of cancer mentioned. An extremely random sampling of the participants for the control group eliminates any doubt that there could have been a relationship between the selected subjects and the exposures therefore, eliminating any possibility of the presence of biases in the study process. The dietary related questions captured questions about the symptoms of reflux that were experienced many years before the time the interview took place (Cranley ., Achkar . Fleshler, 1986). This appeared to have taken into account the biologically significant measure of GER with the ability to realize a forty-fold increase in the risk of reflux symptoms in terms of their duration and harshness. This duration of time enabled acquisition of more accurate data that can influence an informed conclusion. There was high response rate by those who participated in the study as compared to the dietary studies that had been done before to investigate the strength of the association between foods taken and adenocarcinoma esophagus and gastric cardia (Blot , Deresa S.S., Kneller Fraumini., 1991). However, we have no reason to assume that the rates of response between the control group and the study cases were somehow related. The inability of some of the participants to accurately recall their dietary habits is also not a legible explanation as to why the results did not support the hypothesis that certain foods increased the risk of adenocarcinoma esophagus and gastric cardia (Babka Castell, 1973). In conclusion, it was proved that eating of foods that were associated with relaxed LES and temporary GER were practically not related to risk of gastric cardia and adenocarcinoma esophagus. References Allen M., Mellow M., Robinson M. Orr W. (1990). The effect of raw onions on acid reflux and reflux symptoms. Babka J. Castell D. (1973). On the genesis of heartburn: the effects of specific foods on the lower esophageal sphincter. Becker D., Sinclair J., Castell D. Wu W. (1989). A comparison of high and low fat meals on postprandial esophageal acid exposure. Blot W.J, Deresa S.S., Kneller R.N. Fraumini J. F. (1991). Rising incidence of adenocarcinoma of the esophagus and gastric cardia. JAMA. Brown L.M., Swnson C.A., Gridley G., Swanson G.M., Schoenberg J.B. . (1995). Adenocarcinoma of the esophagus and gastric cardia: the role of diet. Cohen S. Booth G. (1975). Gastric acid secretion and lower-esophageal-sphincter pressure in response to coffee and caffeine. N Engl J Med. Cranley J., Achkar E. Fleshler B. (1986). Abnormal lower esophageal sphincter pressure responses in patients with orange juice-induced heatburn. Hansson L.E., Sparen P. Nyren O. (1993). Increasing incidences of both major histological types of esophageal carcinomas among men in Sweden. Int J Cancer. Houghton L., Mangnall U.Y. Read N. (1990). Effect of incorporating fat into a liquid test meal on the relation between intragastric distribution and gastric emptying in human volunteers. Kabat G.C., Ng, SK WynderE.L. (1993). Tobacco, alcohol intake and diet in relation to adenocarcinoma of the esophagus and gastric cardia. Lagergren J., Bergstrom R., Lindsgren, A Nyren O. (1999). Symptomatic gastroesophageal reflux as a risk factor for esophageal adenocarcinoma. Locke, G.R., Talley, N., Fett S., Zinsmeister A.R Melton L.J. (1997). Prevalence and clinical spectrum of gastroesophageal reflux. Olmsted County, Minnesota: Gastroentology. Murphy D. Castell D. (1988). Chocolate and heartburn: evidence of increased esophageal acid exposure after choclate ingestion. Price S., Smithson K. Castell D. (1978). Food sensitivity in reflux esophagitis. R., M. (1995). Pharmacological modulation of motility. Yale. Rothman K. Greenland S. (1998). Modern Epidemology 2nd ed. Philadelphia: Lippincott-Raven. Szarka L. Locke G. (1999). Practical pointers for grappling with GERD. Tzonou A., Lipsworth L., Garidou A., Signorello L.B., Lagiou P. (1996). Diet and risk of esophageal cancer by histologic type in a low-risk population. Int J Cancer. Wolk A., Bergstrom R. Hansson L.E Nyren O . (1997). Reliability of retrospective information on diet 20 years ago and consistency of independent measures of remote adolescents diet. Zhang Z.F., Kurtz R.C., Yu G.P., Sun M., Gargon N. (1997). Adenocarcinoma of the esophagus and gastric cardia: the role of diet.
Thursday, April 2, 2020
Ideology of Gender Roles
In the world of literature, ideology has played a vital role in depicting the condition of the society. The society has used ideologies to obscure the nature and composition of domination. According to Marxists, ideology is designated as a form of politics and law that is used to legitimate power to certain social class in the society. In the traditional setting, ideologies were used to discriminate one community or gender from the other.Advertising We will write a custom essay sample on Ideology of Gender Roles specifically for you for only $16.05 $11/page Learn More It enhanced the superiority of the dominant community through decision-making and social consciousness (Clinton et al. 48). Although ideologies are sometimes true, they have played a vital role in defining the social structure based on gender roles in society. The attitude towards gender role is often characterized by different opinions and beliefs on the roles of women and men in the socie ty. For instance, the common ideology is that the place of women should be in the kitchen. The ideologies on gender roles have enhanced the society to define distinct roles of women and men. In most cases, women have been reported to be the victims of discriminatory acts. The belief has enabled men to have dominance over women in society. Various ways have been used to reveal the perception of ideologies in the society. In Shakespeareââ¬â¢s work, portrayal of ideology in his work is imminent through Medeaââ¬â¢s character. Feminist theorists of theater turned insistently to consider how ideology was embedded in texts and performances. It displays how spectators were positioned to accept such ideologies unquestioningly. For instance, when Medea initially walked on the stage in fifth-century, she was not a woman at all; she was a man in a mask speaking of words of a male playwright to a gathering of male citizens. This has evoked legal and dramatic narratives that her daughters w ere succumbed to, following her stand in the society (Massai 52). Most often, like Medea, they are referred to as ââ¬Å"nonâ⬠women. Gender role ideology is demonstrated by Shakespeare through Othelloââ¬â¢s character. Indeed, absolute social and spiritual equality between different sexes do coexist with equal absolute subjection of women that is decreed and then subverted. Puritan marriage ideology in the Renaissance provides a remarkable index of the ways in which modern values were being created, and conflicts were taking shape.Advertising Looking for essay on gender studies? Let's see if we can help you! Get your first paper with 15% OFF Learn More Othelloââ¬â¢s character demonstrates the apprehension and exploitation of ideological inconsistencies that prevails in the current society. In the scene (1.3) in which Desdemona and Othello seek to justify their marriage before the Vietnam senate, she unwittingly articulates a conception of sexuality and its r elation to public life that is antagonistic to Othelloââ¬â¢s (Massai 68). This demonstrate the clarity in the perception of gender role ideology in the society. In No Name Woman and White Tigers by Maxine Hong Kingston, she used storytelling to demarcate the ideological belief and expose the truth behind the perceived social structures in the society. Kingstonââ¬â¢s chronicle, No Name Woman, demonstrates various examples that show menââ¬â¢s dominance over women. For instance, when men migrated from China to America in search of work, they left women to look after the household chores and the children. The women were expected to keep the customs and rules of the society while their male counterparts fumbled without being detected. Ideally, the work of safeguarding the tradition demands that an individualââ¬â¢s feeling towards an action should be played in oneââ¬â¢s guts without exposing the rage to the society (Kingston 8). This implies that there is a significant diff erence between female and maleââ¬â¢s roles. Consequently, Kingston reveals various forms of ideologies in these two stories that he wrote; blame, oppression, and humiliation. The ideologies are intertwined to demonstrate the societyââ¬â¢s perception of gender roles and its implication on mask superstructure. Kingston demonstrates blame ideology through the revelation of auntââ¬â¢s act of committing adultery. The blame is leveled on the womanââ¬â¢s shoulder while the man is unaccountable of the situation. Although the aunt is stuck in an unsuitable predicament, it is clear that ignorance persist in the society as they are blinded by gender rolesââ¬â¢ ideology. Adultery can only be committed by two people of different sex. In this scenario, Kingston reveals that the men out-live their roles in the society, and they are taken to be in the higher social order than that of women (Massai 32). The ideology of humiliation is demonstrated in No Name Woman when the mother of Ki ngston narrates the story of her aunt. This was aimed at forewarning Kingston against humiliating the family and the clan. Mother tells her story as she feels it is essential to warn her in the early stages of life, that is, before commencing her periods. However, Kingston understanding is quite different from that of her mother. The story reveals the discriminatory acts that exist in the society when one is confined in the cocoon of the societyââ¬â¢s culture. It shows that men will always be dominant in the society if they are not punished equally from the acts they commit. Women are not supposed to be punished excessively and men are treated as royals despite committing the same felony. The ideology outlines that men are not supposed to be humiliated.Advertising We will write a custom essay sample on Ideology of Gender Roles specifically for you for only $16.05 $11/page Learn More The society provides that women are the only ones who can be humilia ted from the unacceptable deeds. Ideologies of oppression do exist, as the women cannot air their grievances publicly. This is demonstrated by the communityââ¬â¢s council of elders where only men are entitled to be the leaders of the community while the women should stay at home (Clinton et al. 254). Kingstonââ¬â¢s memoir focused on gender rolesââ¬â¢ ideology. It shows how men are dominant figure in the society. She also reveals her experience on the societyââ¬â¢s superstructure that discriminates women. Indeed, women have tried to achieve a high social order like their male counterparts, but they are hindered by these ideologies. The use of storytelling aimed at demarcating oppression, discrimination, and humiliation that women face in the society. Her writings provided a challenge to the society on the role of women and men. Kingstonââ¬â¢s chronicle is not an ideology reflection, but it is aimed at enabling the literature work to distance itself from ideological mis conceptions. In conclusion, ideology has been the dominant factor in the traditional and current society. Individuals seem to embed on ideological perception when defining gender-based roles. Human being should not be immune to crime in the society. Men should not be treated fairly when both women and men are found guilty of the same crime. As such, by means of storytelling and writing, Kingston and Shakespeare were able to reveal gender ideologies, and the way men benefit from this misconception. The society needs to understand that ideologies discriminate individuals in the society. Literature work should not instigate gender rolesââ¬â¢ ideologies, but it should demarcate its existence. Womenââ¬â¢s roles should be distinct and where a crime is committed, like in the case of her aunt, both the genders should be treated equally. Works Cited Clinton, Jerome, Irele Abiola James Heather. The Norton Anthology of World Literature. New York: W.W. Norton Co., 2009. Print. Kingston, Maxine. The Woman Warrior: memoirs of girlhood among ghosts. London, Vintage Books, 1989. Print.Advertising Looking for essay on gender studies? Let's see if we can help you! Get your first paper with 15% OFF Learn More Massai, Sonia. World-wide Shakespeareââ¬â¢s: local appropriations in film and performance. London: Taylor Francis, 2005. Print. This essay on Ideology of Gender Roles was written and submitted by user Quinn Flynn to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. 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Sunday, March 8, 2020
Learn About the U.S. Presidential Oath of Office
Learn About the U.S. Presidential Oath of Office Since George Washington first said the words on April 30, 1789, as prompted by Robert Livingston Chancellor of State of New York, every President of the United States has repeated the following simple presidential oath of office as part of the inauguration ceremony: I do solemnly swear (or affirm) that I will faithfully execute the office of President of the United States, and will to the best of my ability, preserve, protect and defend the Constitution of the United States. The oath is worded and administered in accordance with Article II, Section I of the U.S. Constitution, which requires that ââ¬Å"Before he enter on the Execution of his Office, he shall take the following Oath or Affirmation:â⬠Who May Administer the Oath? While the Constitution does not stipulate who should administer the oath to the president, this is typically done by the Chief Justice of the United States. Constitutional law experts agree that the oath could also be administered by a judge or official of the lower federal courts. For example, 30th President Calvin Coolidge was sworn in by his father, then a Justice of the Peace and notary public in Vermont. Currently, Calvin Coolidge remains the only president to be sworn in by anyone other than a judge. Between 1789 (George Washington) and 2013 (Barack Obama), the oath has been administered by 15 Associate Justices, three federal judges, two New York state judges, and one notary public. Hours after the assassination of President John F. Kennedy on November 22, 1963, U.S. District Court Judge Sarah T. Hughes became the first woman to administer the oath when she swore in Lyndon B. Johnson onboard Air Force One in Dallas, Texas. Forms of Administering the Oath Over the years, the presidential oath has been administered in two ways. In one form now rarely used, the person administering the oath posed it in the form of a question, as in, ââ¬Å"Do you George Washington solemnly swear or affirm that ââ¬Ëyouââ¬â¢ will â⬠¦Ã¢â¬ In its modern form, the person administering the oath poses it as an affirmative statement, with the incoming president repeating it verbatim, as in, ââ¬Å"I, Barak Obama do solemnly ââ¬Ëswearââ¬â¢ or ââ¬Ëaffirm that ââ¬ËIââ¬â¢ will â⬠¦Ã¢â¬ Use of Bibles Despite the First Amendmentââ¬â¢s ââ¬Å"Establishment Clauseâ⬠guaranteeing the separation of church and state, incoming presidents traditionally take the oath of office while raising their right hands while placing their left hands on Bible or other books of special ââ¬â often religious significance to them. John Quincy Adams held a law book, indicating his intention to base his presidency on the Constitution. President Theodore Roosevelt did not use a bible while taking the oath in 1901. After George Washington kissed the bible he held while taking the oath, most other presidents have followed suit. Dwight D. Eisenhower, however, said a prayer rather than kissing the Bible he was holding. Use of the Phrase ââ¬ËSo Help Me Godââ¬â¢ Use of ââ¬Å"So help me Godâ⬠in the presidential oath calls into question the constitutional requirement for separation of church and state. Enacted by the First U.S. Congress, the Judiciary Act of 1789 explicitly required ââ¬Å"So help me Godâ⬠to be used in the oaths of all U.S. federal judges and other officers other than the president. In addition, the words of the presidential oath - as the only oath specifically spelled out in the Constitution - do not include the phrase. While not required by law, most presidents since Franklin D. Roosevelt have added the phrase ââ¬Å"So help me Godâ⬠after reciting the official oath. Whether presidents before Roosevelt added the words is a source of debate among historians. Some say that both George Washington and Abraham Lincoln used the phrase, but other historians disagree. Much of the ââ¬ËSo help me Godââ¬â¢ debate hinges on the two manners in which the oath has been given. In the first, no longer used manner, the administrating official frames the oath as a question, as in ââ¬Å"Do you Abraham Lincoln solemnly swearâ⬠¦,â⬠which seems to demand an affirmative response. The current form of ââ¬Å"I do solemnly swear (or affirm)â⬠¦Ã¢â¬ demands a simple response of ââ¬Å"I doâ⬠or ââ¬Å"I swear.â⬠In December 2008, atheist Michael Newdow, joined by 17 other people, plus 10 atheist groups, filed a lawsuit in the District Court for the District of Columbia against Chief Justiceà John Roberts seeking to prevent the Chief Justice from saying ââ¬Å"so help me Godâ⬠in the inauguration of President Barack Obama. Newdow argued that the 35 words of the Constitutionââ¬â¢s official presidential oath do not include the words. The District Court refused to issue an injunction preventing Roberts from using the phrase, and in May 2011, the U.S.à Supreme Court refused Newdows request to hear the case.à What About the Vice Presidents Oath? Under current federal law, the Vice President of the United States recites a different oath of office as follows: ââ¬Å"I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter: So help me God.â⬠While the Constitution specifies that the oath taken by the vice president and other government officials states their intention to uphold the Constitution, it does not specify the exact wording of the oath. Traditionally, the vice presidentââ¬â¢s oath has been administered by the Chief Justice on inauguration day on the floor of the Senate shortly before the president-elect is sworn in.
Thursday, February 20, 2020
Pros and Cons of Government Safety Regulations Essay
Pros and Cons of Government Safety Regulations - Essay Example Governments set strict rules for companies that run businesses involving the emission of toxic chemicals that may cause pollution or pose threats to humans and natural resources. An example is the regulations and standards set by EPA (2015) on carbon emissions. Regulations that limit the levels of wastes or emission serve to protect people from infections or depletion of other ecosystems. Second, safety regulations in business services limit the movement of goods in the market to prevent possible harm to consumers. Safety regulations serve to ensure uncertified products do not get to the market. In the health sector, safety regulations ensure only qualified practitioners provide services. Furthermore, safety regulations ensure that medications supplied to consumers are in the best conditions to attend to the condition. In essence, safety regulations serve the interest of consumers. Although they are essential, safety regulations also have varied challenges. Among the notable disadvan tages is the interference with the optimization of goods. Safety regulations are disadvantageous because they cause high prices of goods. The supply of goods and services is highly likely to be subject to interference under safety regulations. There are possible cases of shortages of goods and services that are subject to government safety regulations. That, consequently, causes an increase in the price of goods and services.Ã
Wednesday, February 5, 2020
Campaign Finance Reforms Essay Example | Topics and Well Written Essays - 500 words
Campaign Finance Reforms - Essay Example The purpose of this Act was to make campaign finance transparent. This was followed by a prolonged period of silence and restraint in this area. In the year 2002, the need for introducing reforms in campaign finance surfaced again. This led to the coming into existence of Bipartisan Campaign Reform Act (Nielsen 43). This Act assured that the private donors are not able to donate much money to the political parties and political contestants that are not legally regulated by the Federal Election Commission. This was indeed a big step towards reforming campaign finance. Still, there were some aspects of this reform that happened to be controversial in a legal context (Nielsen 43). This led to a Supreme Court ruling in the year 2010 in the famous Citizens United vs. Federal Election Commission case, which declared this act to be unconstitutional (Nielsen 59). This Supreme Court verdict once again increased the role played by the corporate money in the American democracy. Thereby this ver dict has generated much public disapproval. This has indeed increased the need for more campaign finance reforms. It is a known fact that collecting campaign finance is a task that takes much time and attention of the Congress men. This diverts their attention from the real issues faced by the country. The politicians are greatly dependent on the private donors for campaign finance. Thereby, this increases the clout of the corporate and private donors in the American political system (Schier 41).
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