second best property value capitalization abstract a simple model of distortive local finance shows how lump sum finance models are misleading what information local prices contain in the presence of distortions and the feasibility of adjusting observed property value changes to infer resident net benefits of public goods

fdi and taxation a meta study despite the continuing political interest in the usefulness of tax competition and tax coordination as well as the wealth of theoretical analyses it still remains open whether or when tax competition is harmful moreover the influence of tax differentials on multinationals decisions is still insufficiently analyzed thus economists have increasingly resorted to empirical analysis in order to gain insights on the elasticity of fdi with respect to company taxation as a result the empirical literature on taxation and international capital flows has grown to a similar abundance during the last 25 years as the respective theoretical literature its heterogeneity leads to a rising need for concise reviews on the existing empirical evidence in this paper we extend former meta analyses on fdi and taxation in three ways first we add the most recent publications unconsidered in meta analyses up to date second we apply a different methodology by using a broad set of meta regression estimators and explicitly discuss which one is most suitable for application to our meta data third we address some important issues in research on fdi and taxation to the clarification of which meta analysis can make valuable contributions these issues are mainly the influence of variables which might moderate effects of tax differentials e g public spending the implications of using aggregate fdi data as opposed to firm level information on measured tax effects the implications of bilateral effective tax rates and the possible presence of publication bias in primary research

a critical comment on niskanen s model niskanen s model has been largely criticized but it still remains a standard explanation of bureaucracy s behaviour in this paper we criticize the monopoly power that niskanen assigns to the bureaucracy a bilateral monopoly between bureaucrats and politicians might be a much more adequate framework for explaining the bureaucracy s behaviour than niskanen s original formulation of a perfect discriminating bureaucracy in a bilateral monopoly model in no case the type of relationship which holds between the sponsor and the bureau leads to an oversupply of output should an excess output occur it would be a consequence of the political decision making mechanisms this result stands in sharp contrast to the niskanen s model but at the same time it is coherent with the fact that when the sponsor introduces control and monitoring mechanisms the sponsor does not pretend to decrease the output but rather to supervise and to reduce the costs of producing the output

districting and government overspending theories of government spending driven by a common pool problem in the fiscal revenues pool predict that greater districting of a political jurisdiction raises the scale of government this paper presents evidence on this and related predictions from a cross section of city governments in the united states the main finding is that when other plausible determinants of government spending are controlled for greater districting leads to a considerably greater scale of government activity the results also show that at large electoral systems do not and forms of government that concentrate powers in the office of the executive do break this relationship

a test for efficiency in the supply of public education this paper devises and applies a statistical test for efficient provision of local public education the test is based on the samuelson condition of equality between the sum of marginal rates of substitution and marginal cost the econometric method is a micro based approach to the estimation of the marginal rate of substitution function this method accounts for possible tiebout bias caused by the fact that individuals may choose their school districts in accordance with their tastes for education

local government structure and the quality of minority neighborhoods one of the most long standing and controversial issues surrounding local government structure in the united states is how reformed political institutions have impacted minority neighborhoods a common belief is that reformism has harmed these neighborhoods but there is no empirical evidence on this issue drawing upon capital asset pricing theory this paper empirically investigates the effects of two reforms the council manager form of government and at large councilor elections on the quality of nonwhite neighborhoods quality is found to be higher in majority white places with at large as opposed to district based elections quality is not found to be affected by the form of government

vertical integration market foreclosure and consumer welfare in the cable television industry i examine the effects of vertical integration between programming and distribution in the cable television industry i assess the effects of ownership structure on program offerings prices and subscriptions and i compare consumer welfare across integrated and unintegrated markets the results of this analysis suggest two general conclusions first integrated operators tend to exclude rival program services suggesting that certain program services cannot gain access to the distribution networks of vertically integrated cable system operators second vertical integration does not harm and may actually benefit consumers because of the associated efficiency gains

a test of executive behavior in the local public sector this paper provides an empirical framework to test three competing theories regarding the behavior of public executives in the local public sector these alternative theo ries are the public interest median voter and expense preference or surplus maximizing leviathan models this study tests these various theories by determining whether aggregate property values the median value of housing or administra tive expenditures is a more significant determinant of the salary of a representative school executive in connecticut the empirical results lend some support for the expense preference model leviathan model of public executive be havior

toward a public choice theory of monopoly regulation its many dimensions from the perspective of market economics this new thrust was consolidated in 1976 by s peltzman who developed a formal market model in which regulations were viewed as commodities brokered via political markets in response to bids and counter bids by those who stood to gain or to lose from specific regulation outcomes the subsequent contribution by becker 1983 added insights and institutional flesh to the stigler peltzman embryo confirming regulation as an integral component of mainstream market economics an important implication of such contributions especially those from the chicago perspective is that regulation for the most part confirms resource efficiency within market process that political markets in the absence of entry barriers are just as effective as are competitive commodity markets in achieving economic efficiency defined within a comparative institutions framework nowhere is this complacency more apparent than in the conclusion drawn by becker 1983 from a detailed formal analysis of competition among pressure groups for political influence

property tax limits local fiscal behavior and property values evidence from massachusetts under proposition abstract this paper examines the impact of a specific property tax limit proposition 2 1 2 in massachusetts on the fiscal behavior of cities and towns in massachusetts and the capitalization of that behavior into property values proposition 2 1 2 places a cap on the effective property tax rate at 2 5 and limits nominal annual growth in property tax revenues to 2 5 unless residents pass a referendum allowing a greater increase the study analyzes the 1990 1994 period a time when massachusetts municipalities faced significant fiscal stress because of a 30 cut in real state aid and a demographically driven increase in school enrollments the findings include the following 1 proposition 2 1 2 significantly constrained local spending in some communities with most of its impact on school spending 2 constrained communities realized gains in property values to the degree that they were able to increase school spending despite the limitation and 3 changes in non school spending had little impact on property values

public sector technical inefficiency in large u s cities abstract technical inefficiency is the extent to which production is below the maximum possible given the mix of chosen inputs controlling for the determinants of local property value that a local government cannot change a city produces local property value through the expenditure and revenue choices that it makes if a city is generating the highest attainable market value of aggregate property within its boundaries given the local fiscal choices that it has made then it is producing local government in a technically efficient manner in this paper using the concept of the stochastic frontier production function we measure technical inefficiency in the local public sector based upon a comparison of local property values the specification introduced allows the random component associated with the presence of technical inefficiency to depend on factors that have been suggested as limiting or enhancing technical inefficiency using a sample of 49 u s central cities we find that large city governments in the united states are operating at different degrees of technical inefficiency and the degree of technical inefficiency varies inversely with measured levels of competitive pressures

driving to opportunity local rents wages commuting costs and sub metropolitan quality of life we examine variation in local rents wage levels commuting costs household characteristics and amenities within metropolitan areas for 2071 areas covering the united states by density and central city status we demonstrate the sensibility of estimating wage levels by workplace not residence and recover decentralized rent gradients that fall with commuting costs we construct and map a willingness to pay index which indicates the quality of life typical households receive from local amenities when households are similar mobile and informed this index varies considerably within metros and is typically high in areas that are dense suburban sunny mild safe entertaining and have elevated school funding

why do households without children support local public schools linking house price capitalization to school spending while residents receive similar benefits from many local government programs only about one third of all households have children in public schools we argue that capitalization of school spending into house prices can encourage even childless residents to support spending on schools we identify a proxy for the extent of capitalization the supply of land available for new development and show that towns in massachusetts with little undeveloped land have larger changes in house prices in response to a plausibly exogenous spending shock towns with little available land also spend more on schools we extend these results using data from school districts in 46 states showing that per pupil spending is positively related to the percentage of developed land this positive correlation persists only in districts where the median resident is a homeowner and is stronger in districts with more elderly residents who do not use school services and have a shorter expected duration in their home our findings support models in which capitalization encourages the provision of durable local public goods and provides an additional reason why some elderly support local school spending

permanent and transitory movements in labor income an explanation for excess smoothness in consumption many have argued that if labor income is difference stationary the permanent income hypothesis predicts that consumption should be relatively volatile in u s aggregate data labor income is well characterized as having a unit root however consumption turns out to be relatively smooth this anomaly is known as deaton s paradox i resolve deaton s paradox by providing decompositions of labor income into permanent and transitory components these preserve the univariate dynamic properties of labor income however when agents distinguish permanent and transitory movements in their labor income as the rational expectations hypothesis asserts they should the permanent income hypothesis correctly predicts the observed smoothness in consumption

testing for indeterminacy an application to u s monetary policy reply this paper considers a prototypical new keynesian model in which the equilibrium is undetermined if monetary policy is passive the likelihood based estimation of dynamic equilibrium models is extended to allow for indeterminacies and sunspot fluctuations we construct posterior weights for the determinacy and indeterminacy region of the parameter space and estimates for the propagation of fundamental and sunspot shocks according to the estimated model u s monetary policy post 1982 is consistent with determinacy whereas the pre volcker policy is not we find that before 1979 indeterminacy substantially altered the propagation of shocks

jurisdictional homogeneity and the tiebout hypothesis abstract in this paper an alternative to the capitalization approach to testing the tiebout model is presented the tiebout foot voting mechanism suggests that households will sort and stratify into approximately homogeneous local public goods jurisdictions at a point in time the efficiency of the sort will be positively related to the number of existing jurisdictions using a measure of homogeneity introduced by theil the relationship between stratification homogeneity within jurisdiction and number of jurisdictions is tested for a sample of school districts within 33 smsas the tiebout stratification hypothesis is confirmed

fiscal pressure tax competition and the adoption of tax increment financing tax increment financing tif has been widely adopted as an economic development tool by municipalities this study estimates a structural probit model of municipal tif adoption decisions using data drawn from cities in indiana it provides empirical evidence that factors such as fiscal pressures tax competition economic distress industrial composition availability of alternative programmes and the expected gains in property values from the use of tif exert significant influence in a city s decision to adopt a tif programme after using an accurate measure of prior growth this analysis finds no empirical evidence to support the contention that growing cities are more likely to adopt tif

current real business cycle theories and aggregate labor market fluctuations hours worked and the return to working are weakly correlated traditionally the ability to account for this fact has been a litmus test for macroeconomic models existing real business cycle models fail this test dramatically we modify prototypical real business cycle models by allowing government consumption shocks to influence labor market dynamics this modification can in principle bring the models into closer conformity with the data our empirical results indicate that it does

external effects in u s procyclical productivity abstract in this paper we highlight a new dimension of the aggregate procyclical productivity phenomenon we show that estimates of the degree of returns to scale are larger for manufacturing as a whole than for two digit industries since this difference must be due to factors that are only internalized at the most aggregate level we term it an external effect this result rules out explanations based on own input variation such as true increasing returns and unmeasured factor utilization tied to own activity as the sole explanations for aggregate procyclical productivity we explore several potential explanations of this external effect

the impact of a state mandated expenditure floor on aggregate property values abstract using a test of allocative efficiency in the local public sector developed by brueckner journal of public economics 19 1982 311 331 this study empirically examines the impact of a state minimum education expenditure requirement on aggregate property values in connecticut communities the empirical results reveal that the typical community in connecticut spends less on education and municipal services than the level that maximizes aggregate property values the results further indicate that spending on education falls further below the property maximization level in those communities constrained by the state expenditure floor it follows from the analysis that some state expenditure floors can raise aggregate property values and promote efficiency

price specification and the demand for public goods abstract nearly all public expenditure demand studies define the marginal price for publicly provided goods as the household s share of the local property tax burden or what is often called the tax price such a definition is at odds with two familiar facts taxes are ordinarily distortionary and property values are often influenced by the value of local services this paper constructs a theoretically consistent marginal tax price measure incorporating these considerations the new measure demonstrates that previous estimates of the price and income elasticities of demand for public services are biased except under very restrictive circumstances moreover the direction of this bias will depend upon the actual incidence of public spending and the tenure status of residents

interjurisdictional sorting and majority rule an empirical analysis the goal of this paper is to provide a comprehensive empirical analysis of majority rule and tiebout sorting within a system of local jurisdictions the idea behind the estimation procedure is to investigate whether observed levels of public expenditures satisfy necessary conditions implied by majority rule in a general equilibrium model of residential choice the estimator controls for observed and unobserved heterogeneity among households observed and unobserved characteristics of communities and the potential endogeneity of prices and expenditures as well as the self selection of households into communities of their choice we estimate the structural parameters of the model using data from the boston metropolitan area the empirical findings reject myopic voting models more sophisticated voting models based on utility taking provide a potential explanation of the main empirical regularities

real business cycles and sunspot fluctuations are observationally equivalent abstract this paper points out that real business cycle models are observationally equivalent to externality models which we define as models with externalities and sunspots but without productivity shocks as far as standard first order systems are concerned however externality models turn out to be more flexible than rbc models this explains at least partly why previous studies have found that externality models perform better than standard rbc models at generating realistic business cycle behavior our results cast doubt on the arguments of farmer and guo 1994 and caballero and lyons 1992

a theory of distributional conflict voluntarism and segregation along with the rise in income inequality in the us there is evidence of a simultaneous move towards fiscal devolution and increased government reliance on private provision of public goods this article argues that these phenomena are related we describe a model of jurisdiction and policy formation in which the structure of government provision is endogenous and public good provision levels are determined by a political process that can exploit private motives for voluntary giving the model predicts that an increase in income inequality leads to decentralisation with local jurisdictions becoming more income homogeneous than the population as a whole this reduction in local income heterogeneity combined with a reduced tax base results in increased reliance by government on private provision

property value maximization and public sector efficiency abstract this paper analyses the efficiency implications of property value maximization communities are open so that utilities are parametric to housing producers and the local government each local government chooses its public good output to maximize aggregate property value in the community ignoring feedback effects on the composition of the housing stock it is shown that this type of government behavior generates an equilibrium in which all communities are internally pareto efficient

leviathan in the crosshairs following in the spirit of the leviathan hypothesis this paper empirically examines how the degree of local government market power influences efficiency in the local public sector market power is measured by the number and relative size distribution of similar government units in the same market area to avoid confusing market power with the comparative efficiency or superiority of larger sized organizations the relative size distribution of the individual government unit is held constant in the empirical analysis in the empirical test aggregate property values serve as the measure of efficiency the empirical results suggest that aggregate property values are lower and thus efficiency suffers in more concentrated municipal market areas ceteris paribus thus providing some evidence for leviathan type governments in connecticut

evaluating the social optimality of durable public good provision using the housing price response to public investment recent empirical work in public finance uses the housing price response to public investment to assess the efficiency of local durable public good provision this paper explores the theoretical justification for this technique it points out that the logic justifying the technique for evaluating non durable public good provision does not translate to the durable case a model in which investment is determined by the interaction between a budget maximizing bureaucrat and a community s residents is used to demonstrate that the technique can falsely predict under provision falsely predict over provision or perform without error

public intermediate inputs property values and allocative efficiency abstract this letter shows that when public goods are intermediate inputs as well as final consumption goods stationary of aggregate property value under a marginal change in public spending implies satisfaction of a generalized samuelson efficiency condition this result shows that the empirical test for efficiency of brueckner 1982 remains valid when public goods enter firm production functions

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

taxation and the tiebout model the differential effects of head taxes taxes on land rents and property taxes on the theory of state and local public finance is the seminal paper by charles tiebout 1956 tiebout constructed a multijurisdictional model in which independent local governments offer a wide variety of expenditure and tax policies and perfectly mobile consumers reveal their preferences for local public goods through their choice of residential community he argued that under such circumstances local public service provision would be efficient the tiebout model has formed the basis of a vast number of subsequent articles in the state and local public finance literature and has also been very influential in urban and regional economics the efficiency properties of various tiebout type models of local public good provision have been examined and the role of politics in these models has been debated at length in this literature of more direct relevance to this paper however is the fact that although tiebout had little to say directly about taxation simply assuming the existence of head taxes subsequent analyses have used adaptations of this model to examine the effects of local head taxes land taxes and property taxes it is the literature on the efficiency and distributional effects of alternative local taxes that is the subject of this survey 1

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

indeterminacy and increasing returns abstract we investigate properties of the one sector growth model with increasing returns under two organizational structures capable of reconciling the existence of aggregate increasing returns with competitive behavior by firms the first involves input externalities the second involves monopolistic competition we show for parameters in close accord with recent literature on real business cycles that the model displays an indeterminate steady state that can be exploited to generate a model of business fluctuations driven by self fulfilling beliefs in our first class of models growth is generated by exogenous increases in factor productivity in the second class the marginal product of capital is large enough for endogenous growth journal of economic literature classification numbers e00 e3 o40

a test for allocative efficiency in the local public sector abstract this paper develops a test for pareto efficiency in the local public sectorusing the analytical result that aggregate property value is maximized at the public output level which satisfies the samuelson condition for efficiency by using cross section data it is possible to deduce whether a representative community provides its public goods in a property value maximizing and hence efficient fashion the empirical results show no systematic tendency to either under or over provide public goods in a sample of massachusetts communities

access pricing and competition abstract in many industries electricity telecommunications railways the network can be described as a natural monopoly a central issue is how to combine the necessary regulation of the network with the organization of competition in activities which use the network as an input and are potentially competitive generation of electricity value added services road transportation in this paper we derive access pricing formulas in the framework of an optimal regulation under incomplete information first we study how access pricing formulas take into account the fixed costs of the network and the incentive constraints of the natural monopoly over the network second we examine the difficulties coming from the accounting impossibility to disentangle costs of the network and costs of the monopoly s competitive goods third the analysis is extended to the cases where governmental transfers are prohibited where the competitors have market power and where competitors are not regulated fourth the possibility some consumers bypass the network is taken into account finally the role of access pricing for inducing the best market structure is assessed the conclusion summarizes our results and suggests avenues of further research

tax increment financing a theoretical inquiry abstract this paper offers an analysis of tax increment financing tif adding to a small theoretical literature on this important fiscal instrument the analysis exploits the theoretical connection between property values and public good levels which is the subject of a large literature in local public finance using this approach the paper shows that localized public improvements are likely to be opposed by property owners outside the affected area who pay higher property taxes with no offsetting benefits by using tax revenue captured from overlapping jurisdictions tif may circumvent this opposition allowing the city to implement the public improvement without an increase in its tax rate tif is not always viable as a financing method however because it may not generate enough additional revenue the analysis shows that tif s viability is ensured only when the public good is at least moderately underprovided relative to the socially optimal level in the case where the public good is slightly underprovided a public improvement is desirable but tif is not viable finally the analysis shows that the public good level ultimately chosen under tif need not be efficient with both under and overprovision being possible outcomes thus while tif may allow a city to carry out needed public improvements the stimulus it provides may be excessive

the value of school facility investments evidence from a dynamic regression discontinuity design author s cellini stephanie riegg ferreira fernando rothstein jesse abstract despite extensive public infrastructure spending surprisingly little is known about its economic return in this paper we estimate the value of school facility investments using housing markets standard models of local public goods imply that school districts should spend up to the point where marginal increases would have zero effect on local housing prices our research design isolates exogenous variation in investments by comparing school districts where referenda on bond issues targeted to fund capital expenditures passed and failed by narrow margins we extend this traditional regression discontinuity approach to identify the dynamic treatment effects of bond authorization on local housing prices student achievement and district composition our results indicate that california school districts underinvest in school facilities passing a referendum causes immediate sizable increases in home prices implying a willingness to pay on the part of marginal homebuyers of 1 50 or more for each 1 of capital spending these effects do not appear to be driven by changes in the income or racial composition of homeowners and the impact on test scores appears to explain only a small portion of the total housing price effect c 2010 by the president and fellows of harvard college and the massachusetts institute of technology

property taxes and property values evidence from proposition 212 abstract we examine the effect of proposition 2 1 2 on revenues and housing prices in massachusetts communities that were initially constrained by the law saw large increases in state aid and the use of fees we use these initial constraints as instruments for changes in other components of revenue while treating the change in the property tax as exogenously determined by proposition 2 1 2 our results strongly suggest that communities that were able to increase their property taxes more rapidly saw greater increases in their housing values in the period following passage of the law

externalities and nonlinear discounting indeterminacy abstract this paper studies a one sector model with externalities and nonlinear discounting loosely if the bellman equation for a standard model is written as v k max u v k then the bellman equation for our model is written as v k max u b v k for some concave function b our model assumes that period utility u is linear in consumption and leisure and the production function exhibits increasing social returns and nonincreasing private returns we establish the existence of a steady state under fairly general conditions and give a necessary and sufficient condition for local indeterminacy we show that regardless of the degrees of increasing returns and externalities there exists a discount function b such that indeterminacy arises we also show that in a certain sense as the degree of increasing returns converges to zero the variability of discounting the second derivative of b required to generate indeterminacy also converges to zero numerical examples are provided the main results are also extended to a one sector model with fixed labor supply

evaluating efficient public good provision theory and evidence from a generalised conditional efficiency model for public libraries abstract provision of most public goods e g health care libraries education police fire protection utilities can be characterized by a two stage production process in the first stage basic inputs e g labor and capital are used to generate service potential e g opening hours materials which is then in the second stage transformed into observed outputs e g school outcomes library circulation crimes solved as final outputs are also affected by demand side factors conflating both production stages likely leads to biased inferences about public productive in efficiency and its determinants hence this paper uses a specially tailored fully non parametric efficiency model allowing for both outlying observations and heterogeneity to analyse efficient public good provision in stage one only we thereby employ a dataset comprising all 290 flemish public libraries our findings suggest that ideological stance of the local government wealth and density of the local population and source of library funding i e local funding versus intergovernmental transfers strongly affect library productive efficiency

fiscal consequences of electoral institutions abstract there are more than 500 000 elected local government officials in the united states the most electorally dense county has more than 20 times the average number of elected officials per capita this paper offers the first systematic investigation of the link between electoral density and fiscal outcomes electoral density presents a tradeoff between accountability and monitoring costs increasing the number of specialized elected offices promotes issue unbundling reducing slack between citizen preferences and government policy but the costs of monitoring a larger number of officials may offset these benefits producing greater latitude for politicians to pursue their own goals at the expense of citizen interests we predict diminishing returns to electoral density and a documentclass aastex usepackage amsbsy usepackage amsfonts usepackage amssymb usepackage bm usepackage mathrsfs usepackage pifont usepackage stmaryrd usepackage textcomp usepackage portland xspace usepackage

tax increment financing interaction between two overlapping jurisdictions abstract this paper analyzes the interaction between two overlapping jurisdictions a school district and a city when one of them the city uses tif tax increment financing to finance an improvement in the provision of its public good both jurisdictions levy taxes on property and they provide different public goods the city is not allowed to raise its tax rate to increase public good provision but since the increment in the public good causes property values to increase the city s revenue is higher with the new level of public good however if this new revenue is not enough to finance the new public good level then tif allows the city to capture for a limited period of time all extra revenues the school district obtains due to the increase in property values then the city and the school district choose the public good level to satisfy their budget constraints with the goal of maximizing total property values two different results regarding efficiency of public good provision are obtained depending on the equilibrium concept used with nash behavior the result is underprovision of the public good provided by the school district the second and more interesting case is when the school district takes into account that its decisions affect the provision of the city s public good in this leader follower equilibrium where the school district plays the role of the leader the results show that the provision of the school district public good depends on how the city s public good is provided if the city s public good is underprovided overprovided then the school district s public good is overprovided underprovided

city government structure are some institutions undersupplied city councilors have a vested interest in maintaining the local government structure that got them elected this resistance to change may result in non optimal supplies of particular local political institutions as cities and metropolitan areas experience changes in population and diversity using unique data from the state of florida we show that there is an undersupply of cities offering larger council sizes our evidence also suggests that there is no undersupply of cities with the mayor council versus the council manager form of government or cities with at large versus district election methods

urban governance competition and welfare the market mechanism of spatial resource allocation is examined in a system of cities where social welfare depends on city size the competitive dynamics of the system is a product of the interplay between people s individual exit type choices migration and their collective voice type choices urban governance it is shown that the use of efficiency enhancing measures of urban governance depends on the pressure of exit a necessary condition for dynamic efficiency is that the market equilibrium of migration is non stable which sounds somewhat paradoxical dynamic efficiency is more likely to emerge between initially small cities in which agglomeration economies dominate than between initially large cities in which agglomeration diseconomies dominate the incentives for proper urban governance are somewhat ambiguous in the most relevant case where cities are of asymmetrical size it is therefore important to strengthen the incentives by means of national urban policy

paving streets for the poor experimental analysis of infrastructure effects abstract we provide the first experimental estimation of the effects of the supply of publicly financed urban infrastructure on property values using random allocation of first time street asphalting of residential streets located in peripheral neighborhoods in mexico we show that within two years of the intervention households are able to transform their increased property wealth into significantly larger rates of vehicle ownership household appliances and home improvements increased consumption is made possible by both credit use and less saving a cost benefit analysis indicates that the valuation of street asphalting as capitalized into property values is about as large as construction costs

local revenue hills evidence from four u s cities we provide estimates of the effects and long run elasticities of the tax base with respect to tax rates for four large u s cities houston property taxation minneapolis property taxation new york city property general sales and income taxation and philadelphia property gross receipts and wage taxation results suggest that three of our cities are near the peaks of their revenue hills minneapolis is the exception a significant negative effect of a balanced budget increase in city property tax rates on the city property base is interpreted as a capitalization effect and suggests that marginal increases in city spending do not provide positive net benefits to property owners estimates of the effects of taxes on city employment levels for new york city and philadelphia the two cities for which employment series are available show the local income and wage tax rates have significant negative effects on city employment levels cuts in these tax rates are likely to be an economically cost effe

capitalization and community size abstract studies often show taxes and public services capitalized into house prices but no one has tested whether the rate of capitalization depends on community size the theoretical model of w h hoyt 1999 regional science and urban economics 29 155 171 predicts that capitalization occurs but that the rate of capitalization is weaker in large communities hoyt s model is tested empirically using a house price hedonic framework the tax capitalization results are less clear but the school quality and crime results firmly support the model s predictions using both school districts and municipalities to measure communities larger communities weaken the rate of capitalization

growth externalities and sunspots abstract in this paper we consider a simple model of neo classical capital accumulation with production externalities in which a continuum of identical infinitely lived agents produce output from a standard stationary neo classical production technology and choose their actions to maximize a discounted sum of single period utilities because of the presence of the externality in production the model exhibits sunspot equilibria

productivity shocks and real business cycles abstract productivity shocks play a central role in real business cycles as an exogenous impulse to macroeconomic activity however measured solow prescott residuals do not behave as an exogenous impulse rather econometric evidence provided in this paper indicates that 1 money interest rates and government spending granger cause these impulses and 2 a substantial component of the variance of these impulses between one quarter and one half is attributable to variations in aggregate demand these results are robust to a number of econometric issues including measurement errors specification of the production function and certain forms of omitted real variables

demographic factors affecting constitutional decisions the case of municipal charters after decades of studying municipal charters largely by looking for patterns in the data we have a good basis for proceeding more formally with testable theories the political significance of demographic change becomes apparent by looking at its impact on political conflict in combination with the biases in social choice rules the theory of civil rights provides a framework for doing this it suggests identifying 1 the distribution of civil rights conveyed to citizens by alternative charters and 2 the bases for political conflict such as different demands for services and the unequal command of economic resources to satisfy them charters then become political tools simple statistical tests fail to refute this

u s industry adjustment to economic deregulation conomic deregulation does not happen overnight it takes time for lawmakers and regulators to dismantle regulatory regimes and then it takes more time for the deregulated industries to adjust to their new competitive environment federal regulatory agencies and the u s congress began liberalizing pricing entry and exit in the transportation financial energy and communications industries during the mid 1970s but while some smaller industries such as intercity bus transportation and air cargo have been fully deregulated during that time the only major american industries fully deregulated to date are airlines and motor carriers as to the pace of industry adjustment consider airlines economic deregulation of the airline industry began in 1974 when the civil aeronautics board first encouraged experiments with discount fares it was completed in 1983 when all regulations on fares entry and exit were eliminated yet more than 20 years after the deregulatory process began the airline industry continues to shed inefficiencies that accumulated over decades of regulation and to find new ways to market their service indeed the airlines latest marketing innovation selling discount fares on the internet would be illegal if fares were still regulated it is not surprising that deregulated or partially deregulated industries are slow to achieve maximum efficiency when regulatory restrictions on pricing operations and entry especially from new firms have been enforced for decades managers and employees of regulated firms settle into patterns of inefficient production and missed opportunities for technological advance and entry into new markets deregulation frees an industry from the state s control over prices entry and exit although of course firms are still subject to antitrust laws and safety regulations after deregulation some costs usually fall in short order but it takes

regulating vertically integrated utilities when transfers are costly but revenues are beneficial this paper considers regulating a vertically integratedutility under asymmetric information about efficiency gainsdue to integration the benchmark case benevolentregulation implies a divestiture of a technically efficientintegration unless the cost savings due to integrating aresubstantial this highlights how private information causes adeviation from the standard perfect information framework this result is at odds with the worldwide experience withpublic utilities that remained integrated almost throughoutthe 20th century despite that integration offered meager or nosavings as now becomes evident of course this divergencebetween normative analysis and facts is no surprise for publicchoice indeed a rather mild kind of a leviathan motive regulators dislike transfers to the utility and by symmetry like revenues coupled with the secrecy only integrationoffers due to private information explains why a regulator hasan interest to keep even economically inefficiently integratedfirms integrated this is in line with crew and rowley 1988 that public regulation serves to milk rather than to imposeefficiency

assessing the efficiency of local open space provision abstract this paper tests the efficiency of local provision of land conservation i examine how housing prices which capitalize open space amenities and future tax obligations change after municipalities vote on referendums for conservation spending using a dynamic regression discontinuity based on voting outcomes results suggest that average housing prices increase about 0 68 1 12 for every 1000 per household of open space spending authorized which indicates inefficiency and underprovision of conservation i also examine tax capitalization and supply side explanations for estimated capitalization

measuring the property value effects of local land use and preservation referenda this paper examines a massachusetts policy that encourages communities to raise money through referenda for preservation and affordable housing i use difference indifferences fixed effects and quantile regression to compare home prices before and after such referenda in two towns i include covariates representing existing land uses zoning and historic resources to estimate the value of these amenities standard regression techniques indicate weak effects of the referenda while the estimated coefficients on land use and historic preservation confirm that preservation has a positive effect on property values the quantile regression sheds light on some heterogeneity that goes unnoticed in standard regression results

taxing incumbent monopoly to foster entry abstract this paper investigates whether it is welfare enhancing to tax the output of a monopoly in order to foster cost inefficient entry this question is of particular concern in the energy markets dominated by cartel like affiliations opec and oil russia s gas exports to europe and the interest and practice to stimulate the development of alternative fuels making the realistic assumption that none of the players can commit to future policies subsidies are not a viable strategy for the government a tax cannot be first best but can be second best if the government cannot force the incumbent monopoly to sell its output at no profit and if the incumbent s profit is discounted however stimulating supply by improving the conditions for entry is not the prime concern of taxation after all it lowers aggregate supplies and may even lower the entrant s supply but to accrue parts of the monopoly rent

imperfect mobility and local government behaviour in an overlapping generations model abstract this paper reconsiders the implications of land value maximizing local governments in an overlapping generations model with imperfect mobility specifically residents develop an attachment to place or location specific capital once they reside in a town for a single time period the analysis shows that attempts by governments to capture the resulting rents from less mobile individuals create inefficient migration leave all workers worse off in an ex ante sense and place relatively high burdens on those workers who have high migration costs public good levels are also inefficiently chosen

household location and tiebout do families sort according to preferences for locational amenities abstract if households sort efficiently across locations then at a given location families receive the same marginal benefit from the locational amenities we test for such sorting by imposing cross equation restrictions on hedonic regressions that difference away location versus house specific effects estimates are obtained using a unique subset of the american housing survey in which adjacent housing units are grouped together and observed in both 1985 and 1989 rejection of the cross equation restrictions unambiguously implies an inefficient sorting of households in contrast the data support the cross equation restrictions which is a necessary but not sufficient condition for efficient sorting

bureaucratic choice and nonoptimal provision of public goods theory and evidence local governments allocation decisions are modeled in the context of a slack maximizing bureaucrat who produces public goods according to a production function that includes both provision and the constituents socio economic characteristics to gain a better understanding of the determinants of slack comparative statics and an empirical study of illinois municipalities are conducted the indirect output distance function provides efficiency scores upon which we regress several variables representing socio economic characteristics costs and competition measures we find that slack or inefficient behavior is associated with richer communities lower education levels and a lack of competition for residents among municipalities

edge versus center finding common ground in the capitalization debate abstract a continuing debate questions whether capitalization of taxes and public services into house price occurs the current study argues for an inverse relationship between housing supply elasticity and capitalization rates a sample is split into houses on the interior and edge of the urban area capitalization of schooling and crime occurs everywhere but it is weaker toward the edge of an urban area where housing supply elasticities and developer activity are greater tax results are less robust but the capitalization rates of crime and school quality are roughly twice as strong on the interior than on the urban fringe

tax avoidance and business location in a state border model abstract previous studies have struggled to demonstrate that higher taxes deter business activity we revisit this issue by estimating the effect of changes over time in cross border differences in state tax conditions on the tendency for new establishments to favor one side of a state border over the other identification is enhanced by taking account of previously overlooked reciprocal agreements that require workers to pay income tax to their state of residence as opposed to their state of employment when reciprocal agreements are in force higher personal income tax rates lure companies from across the border while corporate income tax and sales tax rates have the opposite effect where reciprocal agreements are not in place the results are largely reversed these patterns are amplified in heavily developed locations and differ in anticipated ways by industry and corporate non corporate status of the establishment overall results strengthen the view that state level tax policies do affect the location decisions of entrepreneurs and new business activity but not in a way that lends itself to a one size fits all summary

using market valuation to assess public school spending abstract we examine whether school expenditures are valued by potential residents and whether the current level of public school provision is inefficient by estimating the effect of state education aid on residential property values we find evidence that overall state aid is valued by potential residents and that school districts do not overspend on education however we find that districts may overspend in areas where residents have fewer schooling options but find no difference in efficiency by the degree of district unionization one interpretation of these results is that increased competition may reduce overspending on public schools in some areas

real business cycles and the animal spirits hypothesis abstract we calibrate a quantitative equilibrium macroeconomic model with an aggregate technology that is subject to increasing returns and show that this model may display fluctuations at business cycle frequencies even when there are no shocks to the fundamentals of the economy these fluctuations are due to the self fulfilling beliefs of investors which we call animal spirits we compare the impulse response functions predicted by our model and by two other more standard models with a four variable vector autoregression on u s data our animal spirits economy is the most successful of the three at matching broad features of the dynamic responses in the data journal of economic literature classification numbers e00 e3 e32

local government inefficiency and the tiebout hypothesis does competition among municipalities limit local government inefficiency the tiebout hypothesis has in the past thirty years come to refer to a number of different propositions about local public service provision first there is the point initially stressed by tiebout 15 that the mobility of consumer voters results in a market type of solution to public service provision in which people s demands for public services are revealed as they sort themselves among localities according to their tastes for public services second also discussed by tiebout is the proposition that local public services will tend toward efficient provision finally there is the claim that the mobility of consumers and the competition among the localities for these consumers make politics relatively unimportant in determining local public service provision the bulk of the empirical work on the tiebout hypothesis has attempted to determine if as tiebout suggested local public services are efficiently provided the most common approach has been to estimate the effects of public service provision and tax policy on property values and determine if a balanced budget change in the tax rate changes property values if not then property values are being maximized with respect to public services and public services therefore are efficiently provided studies using this technique include those by oates brueckner and sonstelie and portney 11 1 2 13 these empirical studies while providing evidence about whether or not public services are provided efficiently do not suggest the reasons why local public services are or are not efficiently provided are the limits on inefficiency in the local public sector attributable to local politics or are they the result of the constraints imposed on local governments because of the mobility of residents and capital evidence that local public services are efficiently provided cannot be considered support for the contention that the mobility of people and capital are the factors responsible for this efficiency romer and rosenthal 12 for example provides evidence from

electoral rules and minority representation in u s cities of minority representation majorities tend to disenfranchise minorities through strategic manipulation of electoral rules with the aim of explaining changes in electoral rules adopted by u s cities particularly in the south we show why majorities tend to adopt winner take all city wide rules at large elections in response to an increase in the size of the minority when the minority they are facing is relatively small in this case for the majority it is more effective to leverage on its sheer size instead of risking conceding representation to voters from minority elected districts however as the minority becomes larger closer to a fifty fifty split the possibility of losing the whole city induces the majority to prefer minority votes to be confined in minority packed districts single member district rules serve this purpose we show empirical results consistent with these implications of the model in a novel data set covering u s cities and towns from 1930 to 2000

real business cycles in this paper we demonstrate how certain very ordinary economic principles lead maximizing individuals to choose consumption production plans that display many of the characteristics commonly associated with business cycles our explanation is entirely consistent with i rational expectations ii complete current information iii stable preferences iv no technological change v no long lived commodities vi no frictions or adjustment costs vii no government viii no money and ix no serial dependence in the stochastic elements of the environment we also provide a completely worked out example of the type of artificial economy we have in mind the time series properties of the example exhibit some major features of observed business cycles although this type of model may not be capable of explaining all of the regularities in actual business cycles we believe that it provides a useful well defined benchmark for assessing the relative importance of factors e g monetary disturbances

commuting and taxes theory empirics and welfare implications we examine the effect of interstate differences in income taxes on commuting times our theoretical model introduces a border into a model of an urban area and shows that differences in average tax rates distort commuting patterns but the sign of the effect depends on whether taxes are residence based or employment based empirically tax differentials have a large effect on commuting times for affluent households and mobile households we show that commuting times are a sufficient statistic to measure the spatial welfare effects of tax policy the model and empirical design can be used by economists to study other policy differences this article is protected by copyright all rights reserved

public infrastructure investments productivity and welfare in fixed geographic areas abstract measures of the value of public investments are critical inputs into the policy process and aggregate production and cost functions have become the dominant methods of evaluating these benefits this paper examines the limitations of these approaches in light of applied production and spatial equilibrium theories a spatial equilibrium model of an economy with nontraded localized public goods like infrastructure is proposed and a method for identifying the role of public capital in firm production and household preferences is derived empirical evidence from a sample of large us cities suggests that public capital provides significant marginal benefits but the marginal productivity of public capital is low and aggregate city willingness to pay for large increases in public capital is less than their cost the paper concludes with a brief discussion of the political economy of urban infrastructure investment