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Reinhart-Rogoff Revisited: Why we need open data in economics

Velichka Dimitrova - April 18, 2013 in Featured, Open Data, Open Economics, Open Research, Public Finance and Government Data

Another economics scandal made the news this week. Harvard Kennedy School professor Carmen Reinhart and Harvard University professor Kenneth Rogoff argued in their 2010 NBER paper that economic growth slows down when the debt/GDP ratio exceeds the threshold of 90 percent of GDP. These results were also published in one of the most prestigious economics journals – the American Economic Review (AER) – and had a powerful resonance in a period of serious economic and public policy turmoil when governments around the world slashed spending in order to decrease the public deficit and stimulate economic growth.

Carmen Reinhart

Kenneth Rogoff

Yet, they were proven wrong. Thomas Herndon, Michael Ash and Robert Pollin from the University of Massachusetts (UMass) tried to replicate the results of Reinhart and Rogoff and criticised them on the basis of three reasons:

  • Coding errors: due to a spreadsheet error five countries were excluded completely from the sample resulting in significant error of the average real GDP growth and the debt/GDP ratio in several categories
  • Selective exclusion of available data and data gaps: Reinhart and Rogoff exclude Australia (1946-1950), New Zealand (1946-1949) and Canada (1946-1950). This exclusion is alone responsible for a significant reduction of the estimated real GDP growth in the highest public debt/GDP category
  • Unconventional weighting of summary statistics: the authors do not discuss their decision to weight equally by country rather than by country-year, which could be arbitrary and ignores the issue of serial correlation.

The implications of these results are that countries with high levels of public debt experience only “modestly diminished” average GDP growth rates and as the UMass authors show there is a wide range of GDP growth performances at every level of public debt among the twenty advanced economies in the survey of Reinhart and Rogoff. Even if the negative trend is still visible in the results of the UMass researchers, the data fits the trend very poorly: “low debt and poor growth, and high debt and strong growth, are both reasonably common outcomes.”

Source: Herndon, T., Ash, M. & Pollin, R., “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff, Public Economy Research Institute at University of Massachusetts: Amherst Working Paper Series. April 2013.

What makes it even more compelling news is that it is all a tale from the state of Massachusetts: distinguished Harvard professors (#1 university in the US) challenged by empiricists from the less known UMAss (#97 university in the US). Then despite the excellent AER data availability policy – which acts as a role model for other journals in economics – has failed to enforce it and make the data and code of Reinhart and Rogoff available to other researchers.

Coding errors happen, yet the greater research misconduct was not allowing for other researchers to review and replicate the results through making the data openly available. If the data and code were available upon publication already in 2010, it may not have taken three years to prove these results wrong, which may have probably influenced the direction of public policy around the world towards stricter austerity measures. Sharing research data means a possibility to replicate and discuss, enabling the scrutiny of research findings as well as improvement and validation of research methods through more scientific enquiry and debate.

Get in Touch

The Open Economics Working Group advocates the release of datasets and code along with published academic articles and provides practical assistance to researchers who would like to do so. Get in touch if you would like to learn more by writing us at economics [at] okfn.org and signing for our mailing list.

References

Herndon, T., Ash, M. & Pollin, R., “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff, Public Economy Research Institute at University of Massachusetts: Amherst Working Paper Series. April 2013: Link to paper |
Link to data and code

Sovereign Credit Risk: An Open Database

Marc Joffe - January 31, 2013 in Data Release, External Projects, Featured, Open Data, Open Economics, Open Research, Public Finance and Government Data, Public Sector Credit

Throughout the Eurozone, credit rating agencies have been under attack for their lack of transparency and for their pro-cyclical sovereign rating actions. In the humble belief that the crowd can outperform the credit rating oracles, we are introducing an open database of historical sovereign risk data. It is available at http://sovdefdata.appspot.com/ where community members can both view and edit the data. Once the quality of this data is sufficient, the data set can be used to create unbiased, transparent models of sovereign credit risk.

The database contains central government revenue, expenditure, public debt and interest costs from the 19th century through 2011 – along with crisis indicators taken from Reinhart and Rogoff’s public database.

CentralGovernmentInterestToRevenue2010

Why This Database?

Prior to the appearance of This Time is Different, discussions of sovereign credit more often revolved around political and trade-related factors. Reinhart and Rogoff have more appropriately focused the discussion on debt sustainability. As with individual and corporate debt, government debt becomes more risky as a government’s debt burden increases. While intuitively obvious, this truth too often gets lost among the multitude of criteria listed by rating agencies and within the politically charged fiscal policy debate.

In addition to emphasizing the importance of debt sustainability, Reinhart and Rogoff showed the virtues of considering a longer history of sovereign debt crises. As they state in their preface:

“Above all, our emphasis is on looking at long spans of history to catch sight of ’rare’ events that are all too often forgotten, although they turn out to be far more common and similar than people seem to think. Indeed, analysts, policy makers, and even academic economists have an unfortunate tendency to view recent experience through the narrow window opened by standard data sets, typically based on a narrow range of experience in terms of countries and time periods. A large fraction of the academic and policy literature on debt and default draws conclusions on data collected since 1980, in no small part because such data are the most readily accessible. This approach would be fine except for the fact that financial crises have much longer cycles, and a data set that covers twenty-five years simply cannot give one an adequate perspective…”

Reinhart and Rogoff greatly advanced what had been an innumerate conversation about public debt, by compiling, analyzing and promulgating a database containing a long time series of sovereign data. Their metric for analyzing debt sustainability – the ratio of general government debt to GDP – has now become a central focus of analysis.

We see this as a mixed blessing. While the general government debt to GDP ratio properly relates sovereign debt to the ability of the underlying economy to support it, the metric has three important limitations.

First, the use of a general government indicator can be misleading. General government debt refers to the aggregate borrowing of the sovereign and the country’s state, provincial and local governments. If a highly indebted local government – like Jefferson County, Alabama, USA – can default without being bailed out by the central government, it is hard to see why that local issuer’s debt should be included in the numerator of a sovereign risk metric. A counter to this argument is that the United States is almost unique in that it doesn’t guarantee sub-sovereign debts. But, clearly neither the rating agencies nor the market believe that these guarantees are ironclad: otherwise all sub-sovereign debt would carry the sovereign rating and there would be no spread between sovereign and sub-sovereign bonds – other than perhaps a small differential to accommodate liquidity concerns and transaction costs.

Second, governments vary in their ability to harvest tax revenue from their economic base. For example, the Greek and US governments are less capable of realizing revenue from a given amount of economic activity than a Scandinavian sovereign. Widespread tax evasion (as in Greece) or political barriers to tax increases (as in the US) can limit a government’s ability to raise revenue. Thus, government revenue may be a better metric than GDP for gauging a sovereign’s ability to service its debt.

Finally, the stock of debt is not the best measure of its burden. Countries that face comparatively low interest rates can sustain higher levels of debt. For example, The United Kingdom avoided default despite a debt/GDP ratio of roughly 250% at the end of World War II. The amount of interest a sovereign must pay on its debt each year may thus be a better indicator of debt burden.

Our new database attempts to address these concerns by layering central government revenue, expenditure and interest data on top of the statistics Reinhart and Rogoff previously published.

A Public Resource Requiring Public Input

Unlike many financial data sets, this compilation is being offered free of charge and without a registration requirement. It is offered in the hope that it, too, will advance our understanding of sovereign credit risk.

The database contains a large number of data points and we have made efforts to quality control the information. That said, there are substantial gaps, inconsistencies and inaccuracies in the data we are publishing.

Our goal in releasing the database is to encourage a mass collaboration process directed at enhancing the information. Just as Wikipedia articles asymptotically approach perfection through participation by the crowd, we hope that this database can be cleansed by its user community. There are tens of thousands of economists, historians, fiscal researchers and concerned citizens around the world that are capable of improving this data, and we hope that they will find us.

To encourage participation, we have added Wiki-style capabilities to the user interface. Users who wish to make changes can log in with an OpenID and edit individual data points. They can also enter comments to explain their changes. User changes are stored in an audit trail, which moderators will periodically review – accepting only those that can be verified while rolling back others.

This design leverages the trigger functionality of MySQL to build a database audit trail that moderators can view and edit. We have thus married the collaborative strengths of a Wiki to the structure of a relational database. Maintaining a consistent structure is crucial for a dataset like this because it must ultimately be analyzed by a statistical tool such as R.

The unique approach to editing database fields Wiki-style was developed by my colleague, Vadim Ivlev. Vadim will contribute the underlying Python, JavaScript and MySQL code to a public GitHub repository in a few days.

Implications for Sovereign Ratings

Once the dataset reaches an acceptable quality level, it can be used to support logit or probit analysis of sovereign defaults. Our belief – based on case study evidence at the sovereign level and statistical modeling of US sub-sovereigns – is that the ratio of interest expense to revenue and annual revenue change are statistically significant predictors of default. We await confirmation or refutation of this thesis from the data set. If statistically significant indicators are found, it will be possible to build a predictive model of sovereign default that could be hosted by our partners at Wikirating. The result, we hope, will be a credible, transparent and collaborative alternative to the credit ratings status quo.

Sources and Acknowledgements

Aside from the data set provided by Reinhart and Rogoff, we also relied heavily upon the Center for Financial Stability’s Historical Financial Statistics. The goal of HFS is “to be a source of comprehensive, authoritative, easy-to-use macroeconomic data stretching back several centuries.” This ambitious effort includes data on exchange rates, prices, interest rates, national income accounts and population in addition to government finance statistics. Kurt Schuler, the project leader for HFS, generously offered numerous suggestions about data sources as well as connections to other researchers who gave us advice.

Other key international data sources used in compiling the database were:

  • International Monetary Fund’s Government Finance Statistics
  • Eurostat
  • UN Statistical Yearbook
  • League of Nation’s Statistical Yearbook
  • B. R. Mitchell’s International Historical Statistics, Various Editions, London: Palgrave Macmillan.
  • Almanach de Gotha
  • The Statesman’s Year Book
  • Corporation of Foreign Bondholders Annual Reports
  • Statistical Abstract for the Principal and Other Foreign Countries
  • For several countries, we were able to obtain nation-specific time series from finance ministry or national statistical service websites.

We would also like to thank Dr. John Gerring of Boston University and Co-Director of the CLIO World Tables project, for sharing data and providing further leads as well as Dr. Joshua Greene, author of Public Finance: An International Perspective, for alerting us to the IMF Library in Washington, DC.

A number of researchers and developers played valuable roles in compiling the data and placing it on line. We would especially like to thank Charles Tian, T. Wayne Pugh, Amir Muhammed, Anshul Gupta and Vadim Ivlev, as well as Karthick Palaniappan and his colleagues at H-Garb Informatix in Chennai, India for their contributions.

Finally, we would like to thank the National University of Singapore’s Risk Management Institute for the generous grant that made this work possible.

The Statistical Memory of Brazil

Velichka Dimitrova - January 14, 2013 in Crowd-sourcing, Data Digitalization, External Projects, Featured, Open Data, Open Economics, Public Finance and Government Data, Statistical Memory of Brazil

This blog post is written by Eustáquio Reis, Senior Research Economist at the Institute of Applied Economic Research (Ipea) in Brazil and member of the Advisory Panel of the Open Economics Working Group.


The project Statistical Memory of Brazil aims to digitize and to make freely available and downloadable the rare book collections of the Library of the Minister of Finance in Rio de Janeiro (BMF/RJ). The project focuses on the publications containing social, demographic, economic and financial statistics for the nineteenth and early twentieth century Brazil. At present, approximately 1,500 volumes, 400,000 pages and 200,000 tables have been republished.

Apart from democratizing the contents to both the scientific community and the general public, the project intends the physical preservation of the collection. The rarity, age and precarious state of conservation of the books strongly recommend to restrict physical access to them, limiting their handling to specific bibliographical purposes.

For the Brazilian citizen, free access to the contents of rare historical collections and statistics provides a form of virtual appropriation of the national memory, and as such a source of knowledge, gratification and cultural identity.

The Library of the Minister of Finance in Rio de Janeiro (BMF/RJ)

Inaugurated in 1944, the BMF/RJ extends over 1,200 square meters in the Palacio da Fazenda in downtown Rio de Janeiro, the seat of the Minister of Finance up to 1972 when it was moved to Brasilia. The historical book collection dates back to the early 19th century when the Portuguese Colonial Administration was transferred to Brazil. Thereafter, several libraries from other institutions — Brazilian Customs, Brazilian Institute of Coffee, Sugar and Alcohol Institute, among others — were incorporated to the collection which today comprises over 150,000 volumes mainly specialized in economics, law, public administration and finance.

Rare book collections

For the purposes of the project, the collection of rare books includes a few thousand statistical reports and yearbooks. To mention just a few, the annual budgets of the Brazilian Empire, 1821-1889; annual budgets of the Brazilian Republic since 1890; Ministerial and Provincial reports since the 1830s; foreign and domestic trade yearbooks since 1839; railways statistics since the 1860s; stock market reports since the 1890s; economic retrospects and financial newsletters since the 1870s; the Brazilian Demographic and Economic Censuses starting in 1872 as well as the Brazilian Statistical Yearbooks starting in 1908. En passant, it should be noted that despite their rarity, fragility, and scientific value, these collections are hardly considered for republication in printed format.

Partnerships and collaborations

Under the initiative of the Research Network on Spatial Analysis and Models (Nemesis), sponsored by the Foundation for the Support of Research of the State of Rio de Janeiro and the National Council for Scientific and Technological Development, the project is a partnership between the Regional Administration of the Minister of Finance in Rio de Janeiro (MF/GRA-RJ); Institute of Applied Economic Researh (IPEA) and the Internet Archive (IA).

In addition to the generous access to its library book collection, The Minister of Finance provides the expert advice on their librarians as well as the office space and facilities required for the operation of the project. The Institute of Applied Economic Research provides advisory in economics, history and informatics. The Internet Archive provides the Scribe® workstations and digitization technology, making the digital publications available in several different formats on the website.

The project also makes specific collaborations with other institutions to supplement the collections of the Library of the Minister of Finance. Thus, the Brazilian Statistical Office (IBGE) supplemented the collections of the Brazilian Demographic and Economic Censuses, as well as of the Brazilian Statistical Yearbooks; the National Library (BN) made possible the republication of the Budgets of the Brazilian Empire; the Provincial and Ministerial Reports; the Rio News; and the Willeman Brazilian Review, the latter in collaboration with and the Department of Economics of the Catholic University of Rio de Janeiro.

Future developments an extensions

Based upon open source software designed to publish, manage, link and preserve digital contents (Drupal, Fedora and Islandora), a new webpage of the project is under construction including two collaborative / crowdsourcing platforms.

The first crowdsourcing platform will create facilities for the indexing, documentation and uploading of images and tabulations of historical documents and databases compiled by other research institutions or individuals willing to make voluntary contributions to the project. The dissemination of the digital content intends to stimulate research innovations, extensions, and synergies based upon the historical documents and databases. For such purpose, an open source solution to be considered is the Harvard University Dataverse Project.

The second crowdsourcing platform intends to foster online decentralized collaboration of volunteers to compile or transcribe to editable formats (csv, txt, xls, etc.) the content of selected digital republications of the Brazil’s Statistical Memory project. Whenever possible, optical character recognition (OCR) programs and routines will be used to facilitate the transcription of the image content of the books. The irregular typography of older publications, however, will probably require visual character recognition and manual transcription of contents. Finally, additional routines and programs will be developed to coordinate, monitor and revise the compilations made, so as to avoid mistakes and duplications.

Project Team

Eustáquio Reis, IPEA, Coordinator
Kátia Oliveira, BMF/RJ, Librarian
Vera Guilhon, BMF/RJ, Librarian
Jorge Morandi, IPEA, TI Coordinator
Gemma Waterston, IA, Project Manager
Ana Kreter, Nemesis, Researcher
Gabriela Carvalho, FGV, Researcher
Lucas Mation, IPEA, Researcher

Interns:
Fábio Baptista
Anna Vasconcellos
Ana Luiza Freitas
Amanda Légora

Timeline of Failed European Banks

Anders Pedersen - January 7, 2013 in Crowd-sourcing, Failed Banks, Featured, Public Finance and Government Data


A few months back Open Economics launched a project to list the European banks which have failed recently. After a successful online data sprint and follow up research, we have now collected data on 122 bank failures and bailouts since 1997.

To visualize the data collected on bank failures I created this timeline.

The data collection was initiated as neither the EU Commission, Eurostat nor EBA were able to provide any specific data. We decided to include a broad range of bank crisis measures beyond bankruptcy filing such as bank nationalisations and government bailouts. We also added some bank mergers,and finally we have added several cases where banks entered temporary closure (ie. “extraordinary administration” under Italian law). For each failed bank we have attempted to gather basic details such as the date of collapse, a news source and a news clip explaining the circumstances of the collapse.

We need your help to improve the failed bank tracker? Here’s how you can help.

  • Bank failures are still missing from the list. So if you know of any failures missing from the list, please go ahead and add the information directly in the sheet. If you have corrections to any of the bank appearing, please add them with an attached source and information. If news clips are not available in English, add information in the original language.
  • Descriptions and sources for several of the banks on the list are still missing – in particular on Italian and Portuguese.
  • Additional info. We hope to add more data to each bank failure, in particular a) The total assets prior to collapse and b) The auditor who signed off on the latest annual report. Let us know if you wish to help digging up any of this information.
  • We are eager to hear your view on the approach or any of the listed bank failures. Join the discussion on our mailing-list.

 

The Role of Government: Small Public Sector or Big Cuts?

Velichka Dimitrova - October 30, 2012 in Fact Checking Open Data, Featured, Public Finance and Government Data

This blog post is written for the School of Data Blog and is cross-posted from here.

Second Presidential Debate 2012

News stories based on statistical arguments emphasise a single fact but may lack the broader context. Would the future involve some more interactive form of media communication? Could tools like Google Fusion Tables allow us to delve into data and make our own data visualisations while discovering aspects of the story we are not told about?

There has rarely been an issue as controversial in economic policy as the role of government. Recently the role of government has been in the heart of the ideological divide of the US presidential debates. While Governor Romney advocates against a government-centred (small government) approach and threatens to undo the role of federal government in national life, President Obama supports the essential function of the state (big government) in promoting economic growth, empowering all societal groups with federal investments in education, healthcare and future competitive technology.


Graph 1: United Kingdom and other major country groups. Data Source: World Economic Outlook 2012. Download data from the DataHub

Two weeks ago the Guardian published an article about how the Tory government plans to shrink the state even below US levels, based on the recently-released data from the IMF’s World Economic Outlook. Let’s take the source data and take a look at the bigger picture. On the DataHub, I uploaded all data for “General Government Total Expenditure to GDP” for all countries as well as country groups [See the dataset]. You could use the Datahub Datastore default visualisation tools to build a line graph (select the dataset, then in Preview choose “Graph”) or try the Google Fusion Table with the all countries dataset to select the countries you are interested in exploring.

According to the data Britain would have a smaller public sector1 than the average of all advanced economies by 2017: other country groups are added to show how regions in the world compare (see Graph 1). Even EU countries with staggering public debt – like Greece – would still have a higher relative total government expenditure to GDP according to the projections (see Graph 2).

Graph 2: United Kingdom and other European countries + United States. Data Source: World Economic Outlook 2012. Download data from the DataHub

But what is the bigger picture? And does shrinking the role of government in the economy mean that total government expenditures will fall? Not necessarily, because remember that percentages are relative numbers. The growth or decline of total government spending would ultimately depend on economic growth or the increase of the total output of the economy until 2017. If we take the data for “General Government Total Expenditure” in national currency and build the growth rates2, we see that for the UK the growth rate is above zero, meaning that government expenditure would actually increase overtime, despite the diminishing role of government in the economy’s total output.

Debt-ridden countries like Greece, Portugal or Spain (dropping US and Italy to avoid an over-crowded graph) will have to slash spending first before reaching a positive growth despite their larger public sectors. The lesson is that the size of the public sector does not always equate to actual growth in government expenditures.

Graph 3: Growth in government expenditure for United Kingdom and other European countries. Data Source: World Economic Outlook 2012

Despite having a limited meaning for practical interpretational purposes, the government total expenditure to GDP is often an argument in ideological debates or a measure in policy papers which investigate the impact of government spending on consumption and economic growth or the optimal size of government. While lumped together, government total expenditure varies in composition between high-, middle- and low-income groups: richer societies tend to spend more on social security and welfare, middle- and low-income countries have higher relative capital expenditure and low-income societies tend to spend a larger share of their government budget on the military (e.g. See some examples from earlier IMF publications).

Even if no cuts are actually made, the public sector will eventually shrink: For example inflation could mean that the government will actually spend less in real terms. A smaller public sector in the long run will eventually mean that countries like UK will not be able to support an aging population or provide the same levels of infrastructure and public services as currently used to. Yet smaller public sector might also provide an opportunity to cut taxes, provide incentives for the business sector and boost economic growth. Policy choices about the size of government following the US presidential elections and the sovereign debt crisis in Europe would partly be choices of ideology, as it there is no clear evidence which recipe works for an individual case.

In the next piece in this series, we will look at some of the detailed data available on government staff salaries around the world.



1 The size of the public sector is measured by the percentage of total government expenditure in GDP.

2 How do I build growth rates? Add one column where you build natural logarithm of the absolute expenditure numbers, add another column where you lag all observations by one year: shift the entire column down by one row. In the third column take the difference between the current year logarithm and the lagged value. Growth rate = ln (xt) – ln (xt-1)

How can open data help rebuild trust in business?

Martin Martinoff - October 8, 2012 in Audit and Accounting, Events, External Projects, Hackathon, Public Finance and Government Data

A few months ago, the Finance Innovation Lab launched AuditFutures – a new systemic work around rebuilding trust in business. The first innovation workshop on 4 July was a tremendous success and we have developed a strategy to move the work forward. Not surprisingly, open data came up in the discussions in two of the eight innovation domains. We feel that the knowledge and perspectives of the OKFN will bring value to the discussion.

 

Where are we?

The Finance Innovation Lab was established about four years ago by ICAEW and WWF-UK to inspire a financial system that sustains people and planet. This year, the Lab has been selected by NESTA and the Guardian as one of the top radicals who have transformed society. Building on the established success and momentum of the Lab, the Audit and Assurance Faculty of ICAEW has taken a bold initiative to innovate audit and reconnect the profession with the public interest.

The audit and accounting profession is at crossroads and we believe this is an opportunity to host a positive and proactive process about the future of the profession. Using our open and participatory approach, we organised an innovation workshop to crowdsource ideas for audit so that it can best serve society. On 4 July we convened over 120 participants from more than 75 firms and organisations.

 

What is our approach?

We designed a process to identify the emerging themes that helped form the agenda for the day. We had over hundred perspectives in the room, emerging from over twenty discussion tables. The goal of this process was to collect ideas in a transparent and democratic way, and to visually identify common patterns.

Some of the emerging themes are: the need for more flexibility in audits, standards and regulation;  integration of a broader stakeholder community;  better communication of the value of audit;  engaged dialogue with investors;  developing a new culture of challenge and critical thinking.

We clustered almost fifty themes into eight innovation domains: New Audit Methods, Changing the Culture of Audit, Serving a Wider Stakeholder Base, Rebuilding Trust, A New Reporting Model, IT Innovation, Auditor Reporting, and Recruitment and Training. We hosted in-depth working group discussions around these areas and collected further insights into what would move the ideas forward. Most participants signed up to continue working on some specific areas and we are working with them now.

You can watch a short video from the first assembly here.

 

“Open data is trending – get on board”

This was the summary tweet for one of the working groups. As part of the process of distilling insights and intelligence, we had asked each of the 16 working groups to come up with a tweet that summarises their work.

In two of our innovation domains – ‘Rebuilding Trust’ and ‘IT Innovation’ – open data came up among the discussed themes. The groups looked into what would make most difference to their chosen areas. More open data and transparent information in the audit process have the potential to directly engage wider stakeholder groups. For example, audit files and data could be made publicly open in a machine-readable format.

There is an interesting dynamic in thinking about what open business data could mean. One set of questions would focus around the range of information companies disclose to investors and public scrutiny. In the current climate of tough competition and patent wars, open data might not be regarded favourably.  Another question would be the role of auditor – what specialist skills would be the needed to analyse and visualise the data? Could Google be the next big audit firm?

 

Can OpenAudit be one of the next steps?

The Open Knowledge Foundation has made a significant push towards the transparency and accountability of published financial statements in the public and government sectors. Earlier this year OKFN published a comprehensive report on transparency and accountability in public finance. The report demonstrates the ways technology can contribute to fiscal transparency and offers perspectives and recommendations in several areas like data availability and standards for fiscal data.

In the same time, the OpenCorporates project
has made significant progress in creating the open database of the corporate world. Currently, more than 46 million companies from over 60 jurisdictions are listed (including almost 8 million from  the UK). The project was an award winner in the OpenDataChallenge and in early 2012 was appointed to the Financial Stability Board’s advisory panel on a legal entities identification for finan.

What should be the next step in rebuilding trust in business information? We would like to discuss how open data can help the audit profession and what role auditors can play in the global trend of disclosing more information to the public. It is important to view open data solutions from the perspective of the public interest. Do we have a good understanding of what is relevant and important to the sectors of society that audit serves? It is important to consider whether the users of audit would value it more if it were an insightful dynamic infographic based on open data.

The two starting points for our discussion on OpenAudit would be the business/IT models for open audit data and, more importantly, the broader question on whether provenance of data would help build trust in business.

We definitely have more questions and fewer answers at the moment. The approach of the Finance Innovation Lab is not to ask rhetorical questions but to invite individuals and organisations from diverse fields to search for the right question together. How can audit and open data help rebuild trust in business?

We believe this is a conversation worth having.

To join the discussion, please contact Martin Martinoff, project lead of AuditFutures.

The Benefits of Open Data – Evidence from Economic Research

Guo Xu - October 3, 2012 in Open Data, Open Economics, Public Finance and Government Data

This contribution is by Guo Xu (OKFN Economics and LSE) and the first part of the blog series “Mainstreaming Open Economics”.

Looking back to the Open Knowledge Festival 2012 in September, there’s an impression that openness is everywhere: There are working groups on Open Science and Open Linguistics, topic streams on Gender and Diversity in Openness, and events like Open Prom and Open Sauna: Open Knowledge and Open Data, it seems, is omnipresent.

Looking beyond the Open Knowledge community, however, the situation is very different: In Economics, for example, not many know what “open data”, “open access” or “Open Economics” exactly mean. Indeed, not many even care. A common reaction is: “Yes, it sounds interesting and important, but does it really matter? And why should I care about it?”

In this post, I would like to give some hard evidence on the positive role of opening up information has had in economics, and sketch ideas for how to involve economists – professional or in training – to mainstream ideas of openness. The blog post is divided into three parts: The first part looks at economic research on open data. The second part looks at the impact of open data on economic research. The third part discusses challenges and ways forward.

The real world impacts of open information

Making information accessible to the public can improve public service delivery. In countries where corruption is pervasive, services and funds often do not reach the frontline provider. And even if services do reach the people, the quality of services provided is often shockingly poor: Survey evidence from Bangladesh, Ecuador, India, Peru and Uganda found absence rates as high as 20% and 35% for school teachers and health workers. In many cases, the staff is poorly trained.

Releasing data on service delivery in this case can help reduce corruption and improve public services. In Uganda, researchers provided information to parents by publishing funding data for a random subset of schools in local newspapers. In consequence, corruption decreased significantly, while schooling outcomes improved substantially. Similar evidence in health delivery and redistributive policies suggest that providing information can help the public to discipline public service providers, improving the quality of services.

Information can also expose corrupt politicians: The Federal Government of Brazil, for example, began to select and audit municipalities at random, releasing audit reports to the media. Researchers found that the audit outcomes had a significant impact on the reelection probability of politicians: Those exposed for corruption were punished at the ballots, and the impact was most pronounced in areas where the dissemination of information was favoured by local radio.

A story from fishermen in South India provides another example of how information can improve market efficiency: Studying the adoption of mobile phones in Kerala, researchers have found convincing evidence that access to information through mobile phones helped fishermen sell their catch at the market where the price was highest (and fish most demanded): Instead of sailing to a port and simply hoping for a good price, fishermen were empowered by technology to make informed decisions on how to trade.

Finally, the benefits of transparency are not only restricted to reducing corruption and lowering the cost of information: A comparative study finds that transparency – measured by accuracy and frequency of macroeconomic information released to the public – leads to lower borrowing costs in sovereign bond markets. Open data pays off in many ways – in many different contexts.

These are just a few selective examples on how cutting-edge economic research has identified the benefits of openness in a diverse range of situations. The cases I presented are not based on correlations, but carefully established causal relationships, leaving – at least within the context studied – little doubt that information matters – big time. Perhaps most importantly, these cases have also shown that open data must be understood in a broad sense: These interventions do not take advantage of linked data, do not use CSVs that are shared through Facebook or Twitter – often, these interventions are simple solutions that ultimately help improving the everyday lives of the people.

Technology for Transparent and Accountable Public Finance

Velichka Dimitrova - May 30, 2012 in Public Finance and Government Data, Publications

This post is also published at the OpenSpending blog.

In early March, we embarked on a project to map out projects which use [technology to further the aims of fiscal transparency, accountability and participation](http://openspending.org/blog/2012/03/12/technology-for-fiscal-transparency-where-next.html). Today, we are happy to announce the official release of the resulting report, Technology for Transparent and Accountable Public Finance. Preliminary findings were presented at last month’s [GIFT](http://fiscaltransparency.net/) meeting in Brasilia. Since then, we’ve been building on the comments, follow-up questions and feedback from the session.

Looking at government revenue, expenditure and off-budget information – we have attempted to identify projects from both governments and civil society which use innovative approaches to:

* Publish more or better data related to fiscal processes (aid, revenues, budgets, audits, etc. — see below),
* Help understand this data through the creation of better visualisation and data analysis tools,
* Educate citizens about fiscal processes, and assist civil society organisations promoting accountable governance,
* Facilitate direct participation in fiscal matters through participatory budgeting, citizen auditing and the like,
* Provide policymakers with complete and reliable data relevant to their work, enabling them to make better decisions.

We focussed in particular on the question: ‘Who are the users?’. We examined their motivations for getting involved, the scalability and applicability of given solutions to other contexts. The report also aims to highlight gaps that prevent users from taking up these tools.

### Report now available online

Today, the first edition of the report is published on [OpenSpending.org](http://openspending.org/resources/gift/index.html). It is also available for [download as a PDF](/resources/gift/pdf/ttapf_report_20120530.pdf). Accompanying the report is a [project database – bit.ly/TTAPF-projects ](https://bit.ly/TTAPF-projects) which contains many more projects that publish, analyse and demystify fiscal data.

The section on participatory budgeting deserves special mention. We discovered so many projects that they merited their own listing, which can be found [here](https://docs.google.com/spreadsheet/ccc?key=0AvoV_cBqwo28dE9fZy02NEt2UGxPTnRQMTEzaUhTOGc#gid=4). As we go through, we are building up a catalog of government finance portals in [the ‘finance’ group of datacatalogs.org](http://datacatalogs.org/group/finance). There’s still a lot of work to be done there, but the group already contains the portals mentioned in the report.

As our work continues, we’d love to maintain these connections and hear updates from the projects and learn about new projects. If you have come across an interesting project and think we should feature it, [please let us know](mailto:[email protected])!

### Key Findings

We have tried to highlight specific roles which GIFT could play in promoting the good practice requirements of the report. The slides from the session can be found below:

Read about the highlights in context in the [Highlights, Gaps and Recommendations section](http://openspending.org/resources/gift/chapter1-3.html)

### Read the report

See below for a quick overview of the contents:

* [Chapter 1 – Introduction and Methodology](http://openspending.org/resources/gift/chapter1.html)
* [Chapter 2 – Publishing Fiscal Data: Government Perspectives](http://openspending.org/resources/gift/chapter2-intro.html)
* [Chapter 3 – Using Fiscal Data: Civil Society Perspectives](http://openspending.org/resources/gift/chapter3-intro.html)
* [Chapter 4 – Standards for Fiscal Data: Towards an international framework](http://openspending.org/resources/gift/chapter4-intro.html)
* [Chapter 5 – Case Studies – Where Does the Money Come From?](http://openspending.org/resources/gift/chapter5-intro.html)
* [Chapter 6 – Case Studies – Where Does the Money Go?](http://openspending.org/resources/gift/chapter6-intro.html)
* [Chapter 7 – Case Studies – The Invisible Money](http://openspending.org/resources/gift/chapter7-intro.html)
* [Chapter 8 – Putting the Parts Together, OpenSpending and Publish What You Fund](http://openspending.org/resources/gift/chapter8-intro.html)
* [Final Observations and Review](http://openspending.org/resources/gift/chapter9-intro.html)
* [Further Resources](http://openspending.org/resources/gift/bibliography.html)
* [Appendix](http://openspending.org/resources/gift/chapter10-intro.html)

### Get involved in the next edition

This release is version one, and we hope that the research will be ongoing as the OpenSpending community grows and the tools and network develop. As this happens, we’d really love your input. Some suggestions:

1. Feedback – let us know what you thought of the report and suggest improvements, particularly feedback for GIFT, what role would you like to see them play in this important field?
2. Keep your eyes peeled for interesting projects. We’re hoping to feature information about new projects in the blog, so drop a line to the [mailing list](http://lists.okfn.org/mailman/listinfo/openspending) if you know of any we should feature.
3. Help us build up the [finance group on datacatalogs.org](http://datacatalogs.org/group/finance) and review the sites for their usefulness. Ever tried to get fiscal information out of a portal? Did you get what you were after? And importantly, could you use it once you had it? Let us know [here](https://docs.google.com/spreadsheet/viewform?formkey=dGNXNVFXdDlPNlRDaXB2bXc0aGR5UVE6MQ#gid=0).

Follow up posts on the findings in detail coming soon!

Technology for Fiscal Transparency – Where Next?

Velichka Dimitrova - March 21, 2012 in Announcements, External Projects, Public Finance and Government Data, Publications

 

## Who is using technology to follow the money? The hunt is on…

Over the last month, we have been working on a report entitled “Technology for Transparent and Accountable Public Finance” for the Global Initiative on Fiscal Transparency for next month’s Open Government Partnership meeting.

by imtfi on Flickr

We are hoping to identify the most promising projects around the world that are using technology (web, mobile or otherwise) to further aims of fiscal transparency. Of particular interest are projects that aim to:

* Publish more or better data related to fiscal processes (aid, revenues, budgets, audits, etc. — see below),
* Help understand this data through the creation of better visualisation and data analysis tools,
* Educate citizens about fiscal processes, and assist civil society organisations promoting accountable governance,
* Facilitate direct participation in fiscal matters through participatory budgeting, citizen auditing and the like,
* Provide policymakers with complete and reliable data relevant to their work, enabling them to make better decisions.

We’re particularly interested in efforts to improve transparency in 3 main areas:

* Looking at where the money comes from: In revenue processes (taxation, extractive industry, etc.),
* Monitoring where the money goes: The budgeting process (participatory budgeting, comparisons of planned and retrospective budgets) through to auditing of expenditure, and everything in between.
* The invisible money: projects that aim to improve public understanding of state owned (or semi-owned) enterprises, sovereign wealth funds and contingent liabilities – information on which often are not published as part of current budgeting practices.

There will be particular focus on the questions ‘Who are the users?’ and examining their motivations for getting involved, the scalability and applicability of given solutions to other contexts.

The report will also aim to highlight gaps – so please feel free to think outside the box; if there is cutting edge technology being used in other fields besides public finance, please feel free to suggest it – maybe no-one apart from you has thought of it yet!

## Over to you

We are now opening up to the community to let us know if there are any projects we should be aware of and include in the report.

If you are aware of any projects that we should cover in the report, or if you have any more general observations on the above, please let us know. We have created a [Google form](https://docs.google.com/spreadsheet/viewform?formkey=dGZ1anpCaVZWTTBmR2JQWXFGc0pxeEE6MQ#gid=0) which you can use to give full details and look in more detail into some of the areas we are focussing on.

For more general comments or observations, and notes of people to contact, please don’t hesitate to drop us a line: lucy.chambers [at] okfn.org and velichka.dimitrova [at] okfn.org.