public research and industrial innovations in germany this paper deals with the effects of publicly funded research at universities polytechnics and federal research labs on industrial innovations in germany we discuss the characteristics of companies that benefit from the findings of public research institutions in questioning 2 300 companies we found that less than one tenth of product or process innovating firms introduced innovations between 1993 and 1995 that would not have been developed without public research these new products amount to approximately 5 percent of all new product sales regressions show that firms own r d support the ability to absorb the findings of public research and turn them into innovations contrary to the widely held opinion that proximity to public research institutions does promote collaboration between firms and public research and increase the amount of received knowledge spillovers we found no higher probability of publicly supported innovations for firms in germany that are located near universities or polytechnics

what drives health care expenditure baumol s model of unbalanced growth revisited the share of health care expenditure in gdp rises rapidly in virtually all oecd countries causing increasing concern among politicians and the general public yet economists have to date failed to reach an agreement on what the main determinants of this development are this paper revisits baumol s baumol w j 1967 macroeconomics of unbalanced growth the anatomy of urban crisis american economic review 57 3 415 426 model of unbalanced growth showing that the latter offers a ready explanation for the observed inexorable rise in health care expenditure the main implication of baumol s model in this context is that health care expenditure is driven by wage increases in excess of productivity growth this hypothesis is tested empirically using data from a panel of 19 oecd countries our tests yield robust evidence in favor of baumol s theory

measuring the returns of r d an empirical study of the german manufacturing sector over 45 years abstract motivated by recent statistics that show significant growth in labor productivity this paper seeks to analyze the long term relationship between domestic rd recent rates of return on r d are estimated to have reached an all time low spanning the last 45 years current yields of r d are only one third compared to the sixties in conclusion though the productivity slowdown of the seventies seems to have been overcome this is not attributed to r d investments

second best taxation as a game second best theory usually lies in the realm of normative analysis it focuses attention on the best solutions which still can be obtained in problems where constraints of various natures forbid the attainment of first best pareto optimal situations its central concern is the characterization of such second best solutions and a large part of the literature concentrates on the optimal design of taxes or of policies of public firms taking a second best problem we try in this paper to shift the emphasis from normative to positive considerations the solution we are interested in is not optimal with respect to some a priori given social welfare function embodying justice objectives but it is supposed to reflect the power of the different agents in a negotiation process clearly the conceptual tools required for such an analysis are to be found in game theory and it is actually a game theoretical approach that we follow here the model we are looking at is presented in section ii it formalizes one of the simplest second best problems that can be imagined we have a twogood economy with one private good and one public good agents have different wealth in private good and the public good is financed through a wealth tax this latter fiscal system is clearly not flexible enough to adjust contributions with marginal willingnesses to pay so that we actually face a second best situation there is one decision variable in the society the tax rate which determines the public good production about which the agents have conflicting desires to this problem we associate a game which provides a precise framework for the analysis of the power of the agents the positive outcomes of the negotiation process are supposed to belong to the core of this game sections iii and iv concentrate on the analysis of the core the results strongly contrast with those obtained in the classical studies of the core of 67 0022 053 l 81 040067 25 02 00 o

equilibrium in a finite local public goods economy abstract this paper examines the existence of a noncooperative equilibrium in a finite local public goods economy where consumers have quasi linear preferences jurisdictions consist of consumers who chose the same public project and finance the cost of production of public goods through either a proportional income tax or a poll tax we show that under a proportional income tax scheme a nash equilibria may fail to exist under a poll tax scheme an equilibrium always exists but in general nash equilibria violate a very weak efficiency condition we conclude by commenting on the stabilizing effect of zoning policies journal of economic literatureclassification number c71

valuation equilibrium with clubs abstract this paper considers model worlds in which there is a continuum of individuals who form finite sized associations to undertake joint activities we show how through a suitable choice of commodity space restrictions on the composition of feasible groups can be incorporated into the specification of the consumption and production sets of the economy we also show that if there are a finite number of types then the classical results from the competitive analysis of convex finite agent economies can be reinterpreted to apply journal of economic literatureclassification numbers d51 h41

on the determinants of local government performance a two stage nonparametric approach abstract this article analyzes the efficiency of local governments in the comunitat valenciana spain and their main explanatory variables the analysis is performed in two stages firstly efficiency is measured via nonparametric activity analysis techniques specifically we consider both data envelopment analysis dea and free disposable hull fdh techniques the second stage identifies some critical determinants of efficiency focusing on both political and fiscal policy variables in contrast to previous two stage research studies our approach performs the latter attempt via nonparametric smoothing techniques rather than econometric methods such as ols or tobit related techniques results show that efficiency scores especially under the nonconvexity assumption fdh are higher for large municipalities thus there is empirical evidence to suggest that resources may be better allocated by large municipalities however the inefficiency found is not entirely attributable to poor management as second stage analysis reveals both fiscal and political variables to be explicably related to municipality performance moreover the explanatory variables impact on efficiency is robust to the chosen technique either convex dea or nonconvex fdh

migration proof tiebout equilibrium existence and asymptotic efficiency abstract tiebout s basic claim was that when public goods are local competition between jurisdictions solves the free riding problem in the sense that equilibria exist and are always pareto efficient unfortunately the literature does not quite support this conjecture for finite economies one must choose between notions of tiebout equilibrium which are pareto optimal but which may be empty or which are nonempty but may be inefficient this paper introduces a new equilibrium notion called migration proof tiebout equilibrium which we argue is a natural refinement of nash equilibrium for a multijurisdictional environment we show for sufficiently large economies with homogeneous consumers such an equilibrium always exists is unique and is asymptotically pareto efficient

health care education and the cost disease a looming crisis for public choice an economic specter haunts the democratic governments of the world s most prosperous economies the rising cost of health care and education casts a shadow over virtually every election while increasing costs of other services play a part in the growth of the homeless population and the deteriorating sanitation of city streets it will be shown here that both an explanation and a solution in principle are available however while the solution is in one sense simple and straightforward in another it poses a problem of frightening magnitude for public choice if the citizens of these countries are willing to do what is necessary for the supply of educational health care and other related services to keep up with the expansion in overall economic output made possible by rising productivity then if my analysis is correct a difficult choice will be required either ever more of gross national product will have to be channeled through the public sector with all the problems we know that to entail or alternatively these services will have to be transferred to private enterprise in fields where private business firms can hope to succeed only if granted an improbably immunity from the temptation of unwise governmental interference this is indeed scylla and charybdis in spades

some comments on majority rule equilibria in local public good economies abstract this paper examines some of the main assumptions and results of the literature on majority rule equilibrium in local public good economies it is shown that the usual assumption that the ordering of agents mrss between the private and public good is a continuous monotone function of income and independent of the other economic variables is not necessary for an mre to exist in addition it is shown that in economies with home ownership stratification of agents by income or preferences need not occur in equilibrium

searching for the productivity slowdown some surprising findings from west german manufacturing we test the hypothesis of a negative long term trend and or a structural break in total factor productivity tfp after the first oil price shock for west german manufacturing industries within an econometric model based on a flexible cost function with capital as a quasi fixed factor after adjusting tfp growth for scale economies and varying capacity utilization this hypothesis is not supported by our empirical findings for the great majority of industries studied whereas the hypothesis that the log level of tfp follows a random walk with drift is not rejected by various statistical tests authors

stability in a network economy the role of institutions abstract we consider an economy in which agents are embedded in a network of potential value generating relationships agents are assumed to be able to participate in three types of economic interactions autarkic self provision bilateral interaction and multilateral collaboration through endogenously provided platforms we introduce two stability concepts and provide sufficient and necessary conditions on the network structure that guarantee existence in cases of the absence of externalities link based externalities and crowding externalities we show that institutional arrangements based on socioeconomic roles and leadership guarantee stability in particular the stability of more complex economic outcomes requires more strict and complex institutional rules to govern economic interactions we investigate strict social hierarchies tiered leadership structures and global market places

voting with ballots and feet existence of equilibrium in a local public good economy abstract this paper proves a general existence theorem for equilibrium in a local public good economy with free mobility by extending greenberg and shitovitz s j econ theory46 1988 223 236 approach each jurisdiction s collective choice rule is the d majority voting rule proposed by greenberg econometrica47 1979 627 636 spillover effects of local public goods externalities due to the population distribution and snob effects are all allowed we need transitivity and completeness of preferences these assumptions are not used by greenberg and shitovitz because they do not permit consumers to move free mobility of consumers causes disconnections in consumption sets a problem addressed here journal of economic literatureclassification numbers c62 d72 h72 r13

the causes of government expenditure growth a survey of the u s evidence abstract the growth of government budgets can be broken down into a institutional and institutional components the former component the familiar substitution income and population public goods tax sharing effects is estimated to contribute about two fifths of the growth of u s government spending the latter component rent seeking political redistributions bureaucracy and perceptual informational impedimentia is important too but an exact imputation cannot be asserted given the state of the art in empirical public choice theory the cross effects on spending of the growth of regulation and tax preferences or tax expenditures though interesting is not pursued

envy fairness and political influence in local government wage determination evidence from norway the main question in this paper is do wages of low skilled workers in norwegian local governments adjust to clear the labor market for such workers or are the wages affected by trade unions comparing their wages with other wages inside the local governments the main empirical findings are as follows first wages of low skilled local government employees respond not to wages in the external labor market but to wages of higher skilled and higher paid workers inside the local government second wages are positively associated with the share of socialist politicians in the local council these results are interpreted as support for a union model with internal pay comparisons in norwegian local governments copyright 1995 by the london school of economics and political science

local public goods with mobility existence and optimality of a general equilibrium abstract the existence and optimality of a general equilibrium in a model with a finite number of locations among which the continuum of individuals each individual belonging to one of a finite number of types have to choose is investigated each community finances its own production of public goods by taxes the way in which the tax burden in shared among the different types in the different regions is left arbitrary the model allows for restrictions on the mobility of either residents and or workers congestion and externalities in both production and consumption commuting costs preferences of an individual may also depend on his location as well as on the distribution of all individuals across locations

clubs local public goods and transportation models a synthesis abstract clubs local public goods and transportation models are analyzed within a unified model the emphasis is on the derivation of optimal allocation pricing and the size of the sharing group we derive the conditions under which optimal prices will yield surplus or deficit as well as those under which competitive provision will be efficient given heterogeneous tastes we prove that segregation according to tastes is generally efficient although several cases where this result does not hold are also discussed we show that the existing literature is unnecessarily restrictive and that the unified approach suggested here considerably extends the existing analysis of clubs local public goods and the transportation problems

weakly democratic regular tax equilibria in a local public goods economy with perfect consumer mobility in this paper we study the existence of equilibria in a local public goods economy which has the following structure there are a finite number of geographical regions each region has a government which provides public goods locally by buying private goods inputs on competitive markets and transforming these inputs into outputs of public goods by using a convex technology the local public goods are pure in the sense that all the local residents consume the total produced with no spillovers to other regions each regional government raises revenue from the residents of its region to cover the costs of the public goods it provides the local governments are assumed to be weakly democratic in the sense that no public sector proposal that is a vector of public good provisions and a tax scheme to pay for it will be enacted for which there exists an alternative proposal which is unanimously preferred by the local residents note that it is not being assumed that unanimity is a necessary condition for a public sector proposal to be enacted private goods are produced by price taking profit maximizing producers using convex technologies and are traded across regions a continuum of price taking utility maximizing consumers who are perfectly mobile across regions treat parametrically the public sector proposals of the various local governments in deciding where to live there are a finite number of different types of consumers with type defined by a consumer s preferences initial endowments and share of private sector profits a feasible allocation is a specification of a partition of the consumers among the regions a vector of technically feasible public good provisions and an associated vector of private good inputs used in its production for

does the public sector implode from baumol s cost disease i introduction the origin of the baumol cost disease is lower none productivity growth for services than for manufactures the progressive sector see baumol and brown 1966 and baumol 1967 the public sector in most countries is an important provider of tax financed services such as health education and care the baumol cost disease is accordingly often taken to have fatal consequences for the public sector putting it on an unsustainable trajectory baumol 1993 in one version the argument runs as follows the relative costs of providing services increase and hence more and more resources are needed if the supply of services should match the supply of manufactured goods this leads to an ever increasing tax rate compare lindbeck 2006 and van der ploeg 2007 in another version the tax rate is considered given productivity increases enhance income and thus the tax base leaving more tax revenue however under baumol s cost disease this revenue gain is absorbed by increasing costs just to maintain an unchanged supply of public services an increasing gap between public provision of services and private consumption of manufactures thus evolves which in turn will leave the population increasingly dissatisfied with the public sector this reasoning is often encountered in analyses of fiscal sustainability the aim of such analyses is to assess the financial viability of tax financed welfare arrangements these analyses often make trajectories under the baumol assumption showing that it leads to ever increasing financial problems calling for reforms see for example imf 2014 adding increasing demands for services in particular health services when material living standards increase further adds to these problems 1 see for example hall and jones 2007 and oecd 2013 this appears to leave policy makers in a conundrum either the tax burden is ever increasing leading to an eventual collapse of the economy or the supply of public services would have to be restrained leaving an increasing gap between aspired and realized levels of public service provisions this article takes outset in the baumol assumptions concerning productivity differences baumol growth and asks whether the doomsday implications expounded in the literature and in policy debates are justified this article does not challenge the premises of the baumol argument on differences in productivity growth between manufactures and services 2 but the implications when accounting explicitly for service provision from both the private and public sectors a further starting point is the observation that simple predictions based on baumol growth rely on fixed proportions between private consumption and public service provision as well as neglecting labor supply although the baumol problem has a technological origin its implications cannot be seen independently of preferences and thus private responses as well as the optimal provision of public services this article accordingly differs from the standard literature in three aspects first explicit account is taken of service provision from both the private and public sectors 3 not all services are provided via the public sector and many of the examples used to exemplify the baumol problem are services in private production second a very general formulation of preferences is adopted to capture how technological changes map into changes in key variables and affect the scope for tax financed service provision finally public service provisions and thus taxes are endogenous to analyze how policies respond to the changes induced by the baumol process 4 to focus on the basic implications the model is kept as simple as possible and because no essential intertemporal margins are important the model is static see for example buera and kaboski 2012 rogerson 2008 the main finding of the article is that under baumol growth the doomsday implications for the public sector do not hold

research and development cash flow agency and governance uk large companies this paper investigates the determinants of r d expenditure using a sample of uk listed companies with the highest spend from 2000 to 2005 we investigate the effect of corporate governance and ownership on r d using panel data the results provide some evidence that more governance tends to depress r d activity a finding that is robust to whether a composite or disaggregated index of governance is used one innovation of the paper is that we treat agency and finance effects interactively the ownership stake of the ceo appears to be supportive for r d

interdependencies between the science and technology infrastructure and innovation activities in german regions empirical findings and policy consequences abstract regional studies have detected interdependencies between the technological infrastructure and the innovation activities of the respective regions it is commonly agreed that the private knowledge base of companies in a region is supplemented by the public knowledge of research institutes located in the region on account of the accumulation of knowledge and regional effects competitive regional specialisation patterns evolve this paper follows studies from the united states and underlines the mostly positive influence between the public science infrastructure and the industrial science and technology output the empirical part deals with the federal states laender of germany for two of them baden wuerttemberg bw and north rhine westphalia nrw an innovative in depth analysis based on a breakdown of activities in 18 technology areas is presented consequences for science and technology policy are discussed

r d capital rate of return on r d investment and spillover of r d in japanese manufacturing industries the effect of r 50d on productivity growth in japanese manufacturing industries is examined using more accurate firm r 50d expenditure data than widely used data based on financial statements series of r 50d capital are constructed then rate of return on r 50d investment is estimated in addition the impact of other industries r 50d on the productivity growth of an industry is also estimated an attempt is made to determine the effect of electronics technology upon the productivity growth of other industries through the transaction of the intermediate electronics goods with improved quality and through the diffusion of the new technological knowledge discovered japanese technology trade 1977 1981 copyright 1989 by mit press

high growth firms in changing competitive environments the us pharmaceutical industry 1963 to 2002 firms across sectors and regions are highly skewed in their ability to engage with innovation and even more skewed in their ability to translate investments in innovation into higher growth recent attention has been placed on the importance of high growth firms hgf for innovation policy our paper explores under what conditions hgf matter for translating r d investments into economic growth and how this depends on firm specific and industry specific factors we use quantile regression techniques to study the r d growth relationship in hgf compared to low growth firms unlike previous studies we pay particular attention to whether this relationship depends on the particular period in the industry s life cycle we focus on the us pharmaceutical industry from 1963 to 2002 and find that the r d growth relationship is sensitive to the changing competitive environment over the industry s history which suggests that innovation policy must focus not only on firm attributes but also competitive structures

strong tiebout equilibrium under restricted preferences domain abstract we investigate the existence and give a partial characterization of a strong tiebout equilibrium which consists of an endogenously formed partition of the individuals into disjoint jurisdictions with each jurisdiction producing and financing its own public goods and moreover there exists no group of individuals who can all benefit by establishing their own community in particular no single individual finds it desirable to migrate from his equilibrium jurisdiction the existence proof makes use of the notion of consecutive games which we introduce and show that for such games there always exists a partition with a nonempty core

a critique of tiebout s theory of local public expenditures the last section of this paper presents a rigorous version of tiebout s theory of local public goods it is shown that equilibria exist and are pareto optimal this rigorous theory follows closely the more rigorous part of tiebout s work this rigorous theory makes a number of very special assumptions which make local public goods essentially private the body of this paper presents a series of examples which show that if one tries to generalize the rigorous version of tiebout s theory in a number of interesting directions then equilibria may no longer exist or may not be pareto optimal the conclusion is that tiebout s idea does not lead to a satisfactory general theory of local public goods the goal of this paper is to point out that tiebout s notion of equilibrium with local governments does not have the nice properties of general competitive equilibrium except under very restrictive assumptions tiebout 39 suggested that there are competitive forces which tend to make local governments allocate resources in a pareto optimal fashion consumers choose to live in those towns with the mix of taxes and public goods they prefer local governments choose this mix so as to attract inhabitants this idea may seem intriguing for it suggests that the invisible hand solves an important part of samuelson s perplexing public goods problem 32 tiebout in fact makes an argument which is nearly rigorous i give a rigorous version of his argument at the end of the paper however in this rigorous version so many restrictive assumptions are made that public goods become essentially private in the body of the paper i give a series of examples with which i try to convince the reader that one is forced to adopt tiebout s restrictive assumptions the idea is that if one changes any of his assumptions then either equilibria may not exist or may not be pareto optimal my examples are presented in the context of a general class of tiebout models i consider several subclasses one of which is the special case considered by tiebout in each of the subclasses except that considered by tiebout i give a counterexample either to the existence of equilibrium or to its pareto optimality the subclasses are so chosen that the difficulties they reveal would be shared by any reasonable tiebout model which differed from his special case i believe that my examples controvert tiebout s suggestion 39 last paragraph that his theory compares favorably with competitive equilibrium theory most of the examples in this paper have already appeared in the literature i cite related work as i go along what is new here is that i assemble the examples in a unified argument

budgetary constraints and programmatic choices by flemish subsidized theatres we analyse programmatic choices of flemish theatres and examine how they are affected by the theatres budgetary situation following lancaster s characteristics approach we identify several output characteristics of individual flemish theatres during the period 1980 to 2000 a simultaneous equation approach is used to capture the theatre managers subsidizing government s and consumers behaviour we find that changes in the budgetary situation of a theatre are translated into changes of both the amount and the nature of the theatre s output the budgetary impact on artistic choices has intensified since the introduction of a 4 yearly instead of yearly allocation of subsidies the decrease in financial risk for the individual theatres leads to an increase in artistic risk taking

clubs and the market this paper defines a general equilibrium model with exchange and club formation agents trade multiple private goods widely in the market can belong to several clubs and care about the characteristics of the other members of their clubs the space of agents is a continuum but clubs are finite it is shown that i competitive equilibria exist and ii the core coincides with the set of equilibrium states the central subtlety is in modeling club memberships and expressing the notion that membership choices are consistent across the population

institutions efficiency and the strategic behaviour of sponsors and bureaus abstract the over production associated with bureaucratic production is examined in a general equilibrium environment in which the bureau and its sponsor behave strategically seemingly minor modifications in institutional settings give major differences in nash equilibrium outcomes the non equivalence of institutional settings suggests that over production or under production by bureaus can be a result of the institutions governing the decision process as well as the preferences of the bureau for the size of the bureau

public sector efficiency the roles of political and budgetary institutions fiscal capacity and democratic participation the purpose of this paper is to investigate whether efficiency in public service provision is affected by political and budgetary institutions fiscal capacity and democratic participation in order to address this issue we take advantage of a new global efficiency measure for norwegian local governments we find that high fiscal capacity and a high degree of party fragmentation contribute to low efficiency in addition there is some evidence that democratic participation increases efficiency while a centralized top down budgetary procedure is associated with low efficiency

does the u s health care sector suffer from baumol s cost disease evidence from the 50 states this study examines if health care costs in the united states are affected by baumol s cost disease it relies on an empirical test proposed by hartwig 2008 and extended by colombier 2010 and uses a panel data set of 50 states over the 1980 2009 period the results suggest that health care costs grow more rapidly when economy wide wage increases exceed productivity gains the findings are fairly robust with respect to time and state fixed effects individual state time trends and two stage least square estimation consequently this study suggests that the u s health care sector suffers from baumol s cost disease

explaining differences in productive efficiency an application to belgian municipalities the purpose of this paper is to measure and explain variations in productive efficiency of municipal governments in belgium technical efficiency is evaluated using a non parametric method based on the free disposal hull fdh reference technology we first calculate input output and graph farrell efficiency measures for a cross section of all 589 belgian municipalities in a second stage of the analysis we explain the calculated differences in efficiency in terms of variables related to the structural characteristics of municipalities and to the institutional environment

cost disease in defense and public administration baumol and politics william baumol s model predicts a steady increase in relative public sector prices or costs because of the combination of slow productivity growth and wage growth similar to sectors wherein productivity is growing more quickly in this paper we extend the baumol model with political variables and analyze price growth in defense and public administration using norwegian data we find strong support for the mechanism of the baumol model since manufacturing productivity is the most important determinant of relative public sector prices greater political fragmentation has also contributed to the price growth but its quantitative effect is smaller than that of manufacturing productivity an analysis of a labor intensive private service restaurants and cafes supports the broader relevance of the baumol mechanism and the validity of the estimated effect of political fragmentation on the two sectors considered herein

local government grants and income tax revenue redistributive politics in norway 1900 1990 an important aspect of the welfare state is public provision of private goods primarily education and health care in norway the provision of these services has been organized through the local public sector the development of the welfare state has to a large extent been the development of welfare communes the important revenue sources of the local and county governments grants and income tax revenue have been controlled nationally and the paper addresses the determinants of these revenues during 1900 1990 the approach combines a demand model of local public services emphasizing price and income elasticities with a political economy model of central government ideology and strength the decision making is understood as bargaining between the government and interest groups and the political structure consequently is of importance for the policy outcome the analysis shows how politics matter and the results indicate that a minority coalition government implies 30 more grant and income tax revenue to local and county governments than one party majority in the long run

unraveling the productivity growth slowdown in the u s canada and japan the effects of subequilibrium scale economies and markup measures of productivity growth typically include in the productivity residual the impacts of fixity of factors subequilibrium costs of adjustment returns to scale and markups this paper proposes a general framework for adjusting the residual to accommodate these impacts by first correcting and then decomposing traditional measures use of the framework is illustrated empirically for the united states japanese and canadian manufacturing sectors using an econometric model that allows explicit incorporation and measurement of these factors the adjusted measures show that a significant amount of cyclical and secular change in measured productivity growth can be attributed to production characteristics other than technical change particularly scale effects copyright 1992 by mit press

baumol s cost disease and the sustainability of the welfare state if productivity increases more slowly for services than for manufactured goods then services suffer from baumol s cost disease and tend to become relatively more costly over time since the welfare state in all countries is an important supplier of tax financed services this translates into a financial pressure that seems to leave policymakers with a trilemma increase tax distortions cut spending or redistribute less under the assumptions underlying baumol s cost disease we show that these dismal implications are not warranted the welfare state is sustainable and there is even scope for pareto improvements under baumol s cost disease