Luis Serv�n’s scientific contributions

The purpose of this study is to provide an overview of fiscal policies and PFM reforms in 7 countries in the Western Balkans and 12 countries in the CIS, including major macroeconomic and poverty trends, fiscal policy, the size and role of the public sector, public expenditure management and its linkage to policy development, the organization of budget processes on the central and local levels, the role of various actors and tools in PFM, including civil society and the international donor community. The period of 2003-2007 was characterized by an extraordinary high rate of economic growth, both worldwide and in the CEE/CIS region. This created macroeconomic room for meeting numerous development challenges: reducing poverty and inequality, improving the quality and coverage of public services, upgrading infrastructure, and advancing various reforms, including those related to PFM. However, the economic situation deteriorated dramatically in 2008 as a result of the global financial crisis, with deep recession hitting most of the countries in 2009 and bleak perspectives for subsequent years. It remains to be seen whether the crisis situation will force governments to speed up necessary reforms. In the PFM area major tasks concern lengthening fiscal planning horizon and gradual movement toward performance oriented budgeting (the measure which can allow better expenditure targeting and decrease volatility in expenditure allocation), increasing budget transparency and creating real room for civil society involvement into a budget process. However, the reforms must also involve a broadly defined governance sphere, i.e. improving transparency and accountability of government, modernization of civil service, decentralization, including building a genuine system of local and regional self-government, and other similar measures to improve quality of public services and social policy interventions.

This paper analyses, in a simple two-region model, the undertaking of noxious facilities when the central government has limited prerogatives. The central government decides whether to construct a noxious facility in one of the regions, and how to …nance it. We study this problem under both full and asymmetric information on the damage caused by the noxious facility in the host region. We particularly emphasize the role of the central government prerogatives on the optimal allocations. We …nally discuss our results with respect to the previous literature on NIMBY and argue that taking into account these limited prerogatives is indeed important.