buying votes vs supplying public services political incentives to under invest in pro poor policies this paper uses unique survey data to provide for the first time in the literature direct evidence that vote buying in poor economies is associated with lower provision of public services that disproportionately benefit the poor various features of the data and the institutional context allow the interpretation of this correlation as the equilibrium policy consequence of clientelist politics ruling out alternate explanations such as for example poverty driving both vote buying and health outcomes the data come from the philippines a country context that allows for measuring vote buying during elections and services delivered by the administrative unit controlled by winners of those elections the data reveal a significant robust negative correlation between vote buying and the delivery of primary health services in places where households report more vote buying government records show that municipalities invest less in basic health services for mothers and children and quite strikingly as a summary measure of weak service delivery performance a higher percentage of children are severely under weight

business cycles and long run growth in this survey we discuss the effect of macroeconomic fluctuations on long run growth from both a theoretical and empirical perspective we emphasize the opportunity cost approach which states that firms will intertemporally substitute productivity enhancing activities for regular production activity during recessions we provide aggregate evidence in favor of the opportunity cost approach copyright 1997 by oxford university press

the impact and targeting of social infrastructure investments lessons from the nicaraguan social fund this brief summarizes the impact and targeting of social infrastructure investments lessons from the nicaraguan social fund the fund was created in 1990 the benefit incidence and impact of projects financed by the nicaraguan emergency social investment fund are investigated using a sample of beneficiaries a national household survey and two distinct comparison groups the first group is constructed on the basis of geographic proximity between similar facilities and their corresponding communities the second is drawn from the national living standards measurement study survey sample using propensity score matching techniques the analysis finds that the social fund investments in latrines schools and health posts are targeted to poor communities and households whereas those in sewerage are targeted to the better off investments in water systems are poverty neutral education investments have a positive significant impact on school outcomes regardless of the comparison group the analysis finds that use of health investments is less clear using one comparison group the analysis finds that use of health clinics increased as a result of the investments using both it finds higher use of clinics for children under age six with diarrhea with neither comparison group does it find improvements in health outcomes social fund investments in water and sanitation improve access to services but have no effect on health outcomes

capture and governance at local and national levels 135 despite the importance of this issue not much systematic research appears to have been devoted to assessing the relative susceptibility of national and local governments to interestgroup capture here we describe a model of two party electoral competition with probabilistic voting behavior and lobbying by specialinterest groups based on david baron 1994 and gene grossman and elhanan helpman 1996 that helps identify determinants of relative capture at different levels of government these include relative levels of voter awareness and interest group cohesiveness electoral uncertainty electoral competition heterogeneity of districts with respect to inequality and the electoral system while some of these uphold the traditional madisonian presumption others are likely to create a tendency for lower capture at the local level so the net effect is theoretically ambiguous this suggests that the extent of relative capture may be context specific and needs to be assessed empirically

who is vouching for the input voucher decentralized targeting and elite capture in tanzania input subsidy programs carry support as instruments to increase agricultural productivity provided they are market smart this requires especially proper targeting to contain the fiscal pressure with decentralized targeting of input vouchers currently the instrument of choice nonetheless despite clear advantages in administrative costs the fear of elite capture persists these fears are borne out in the experience from the 2008 input voucher pilot program in kilimanjaro tanzania examined here elected village officials received about 60 percent of the distributed vouchers a factor that significantly reduced the targeting performance of the program especially in more unequal and remote communities when targeting the poor greater coverage and a focus on high trust settings helped mitigate these concerns the findings highlight the continuing need for scrutiny when relying on decentralized targeting a clearer sense of purpose increasing productivity among poorer farmers versus increasing aggregate output could also enhance the targeting performance

who is at the wheel when communities drive development evidence from the philippines summary community driven development cdd approaches have become an important part of development operations using data from 1 200 households in 66 communities participating in a cdd project in the philippines we analyze how communities select their proposals and how resources are allocated across villages resources flow to the poorest and more politically active villages controlling for poverty more unequal villages are more likely to receive funding this surprising result is because in more unequal villages the elected village leader is more likely to override community preferences and to influence inter village competition such that project resources flow to their villages

on the empirics of social capital this paper critically examines the way in which empirical evidence is developed in support of a role for social capital in socioeconomic outcomes three leading studies of social capital are reviewed and in each case argued to suffer from various identification problems a general set of conditions under which social capital effects may be identified in linear models is given careful attention to these conditions combined with greater openmindedness as to what constitutes appropriate evidence seems the best route to improving empirical studies of social capital

unequal societies income distribution and the social contract this paper develops a theory of inequality and the social contract aiming to explain how countries with similar economic and political fundamentals can sustain such different systems of social insurance fiscal redistribution and education finance as those of the united states and western europe with imperfect credit and insurance markets some redistributive policies can improve ex ante welfare and this implies that their political support tends to decrease with inequality conversely with credit constraints lower redistribution translates into more persistent inequality hence the potential for multiple steady states with mutually reinforcing high inequality and low redistribution or vice versa

the political economy of expenditures by the peruvian social fund foncodes 1991 95 the peruvian social fund foncodes was created by president alberto fujimori in 1991 with the stated objectives of generating employment alleviating poverty and improving access to social services this article uses province level data on monthly expenditures socioeconomic indicators and electoral outcomes to analyze political influences on the timing and geographic distribution of foncodes expenditures between 1991 and 1995 i reach three main conclusions first these expenditures increased significantly before national elections second foncodes projects were directed at provinces in which the marginal political effect of expenditures was likely to be largest third these projects favored the poorest provinces which suggests that the program also had a redistributive function the results are robust to a large number of specifications and controls the peruvian data support predictions made in the literature on political business cycles as well as the literature on political influences on the allocation of discretionary funds

natural resources decentralization and risk sharing can resource booms unify nations previous studies imply that a positive regional fiscal shock such as a resource boom strengthens the desire for separation in this paper we present a new and opposite perspective we construct a model of endogenous fiscal decentralization that builds on two key notions a trade off between risk sharing and heterogeneity and a positive association between resource booms and risk the model shows that a resource windfall causes the nation to centralize as a mechanism to either share risk and or prevent local capture depending on the relative bargaining power of the central and regional governments we provide cross country empirical evidence for the main hypotheses finding that resource booms i decrease the level of fiscal decentralization with no u shaped patterns ii cause the former due to risk sharing incentives primarily when regional governments are relatively strong and iii have no effect on political decentralization

majority voting with single crossing preferences we clarify and extend a number of sufficient conditions for the existence of a majority voting equilibrium on one dimensional choice domains these conditions variously stated in the previous literature all impose order restrictions on voter preferences for instance monotone marginal rates of substitution which we show to imply or be equivalent to a general ordinal version of the single crossing condition this simple property is economically intuitive and easily checked in applications this ease of application is demonstrated through an examination of voting models of redistributive income taxation and trade union bargaining behaviour

on the unequal inequality of poor communities important differences exist between communities with respect to their needs capacities and circumstances as central governments are not able to discern these differences fully they seek to achieve their policy objectives by relying on decentralized mechanisms that use local information however household and individual characteristics within communities can also vary substantially a growing theoretical literature suggests that inequality within communities can influence policy outcomes and that this influence could be harmful or helpful depending on the circumstances empirical investigations into the impact of inequality have to date largely been held back by a lack of systematic evidence on community level inequality the authors use household survey and population census data to estimate per capita consumption inequality within communities in three developing countries ecuador madagascar and mozambique communities are found to vary markedly from one another in terms of the degree of inequality they exhibit the authors also show that there should be no presumption that inequality is less severe in poor communities they argue that the kind of community level inequality estimates generated in this paper can be used in designing and evaluating decentralized antipoverty programs

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

decentralizing antipoverty program delivery in developing countries we study the effects on accountability in government service delivery of decentralizing administration of an antipoverty program while governments at both central and local levels are vulnerable to antipoor policy biases owing to political capture centralized delivery systems are additionally prone to bureaucratic corruption owing to problems in monitoring bureaucratic performance decentralizing the delivery system promotes cost effectiveness and improves intraregional targeting at low program scales but interregional targeting may deteriorate as central grants to high poverty regions shrink owing to high capture of local governments by local elites in such regions

the economics of collective reputation evidence from the wine industry we use original data regarding the array of italian winery coalitions wine denominations to analyze the economics and determinants of collective reputation we first run a cross sectional analysis with 2008 data and the full set of control variables then move to the dynamics of collective reputation with panel data analysis on a 30 year time span 1978 2008 group reputation is history dependent in particular past bad collective behavior increases the probability of being stuck in a bad reputation trap minimum quality standards and effective enforcement are fundamental drivers of group reputation the relationship between group size and collective reputation is non linear free entry may not be optimal due to free riding problems finally institutional signals such as the wine classification system are useful because they can be used by consumers as easily available proxies for information that is much more difficult to acquire

the political economy of village sanitation in south india capture or poor information despite efforts to mandate and finance local governments provision of environmental sanitation services outcomes remain poor in the villages surveyed in the four south indian states the analysis indicates some key issues that appear to hinder improvements in sanitation local politicians tend to capture sanitary infrastructure and cleaning services for themselves while also keeping major village roads reasonably well served their decisions suggest however that they neither understand the health benefits of sanitation nor the negative externalities to their own health if surrounding areas are poorly served our findings suggest that improving sanitary outcomes requires disseminating information on the public goods nature of their health benefits as well as on the local government s responsibilities it also requires putting public health regulations in place along with measures to enable accountability in service provision

supporting communities in transition the impact of the armenian social investment fund the armenian social investment fund supports communities efforts to improve local infrastructure during armenia s economic transition away from central planning financing community designed and implemented projects to rehabilitate primary schools water systems and other infrastructure this article considers the targeting household impact and community effects of the social fund s activities it relies on a nationally representative household survey oversampled in areas where the social fund was active using propensity and pipeline matching techniques to control for community self selection into the social fund it evaluates the household effects of rehabilitating schools and water systems the results show that the social fund reached poor households particularly in rural areas education projects increased households spending on education significantly and had mild effects on school attendance potable water projects increased household access to water and had mild positive effects on health communities that completed a social fund project were less likely than the comparison group to complete other local infrastructure projects suggesting that social capital was expended in these early projects by contrast communities that joined the social fund later and had not yet completed their projects took more initiatives not supported by the social fund in centrally planned economies national governments exerted tremendous economic control this control extended to investment in local infrastructure including building and maintaining roads schools and water systems when these economies collapsed governments became bereft of resources systems for maintaining local infrastructure began to fail as deep economic recession took hold schools and water systems fell into disrepair local public services deteriorated compounding other hardships for people living in postcommunist conditions but because communities were accustomed to relying on central authorities to meet local needs they often were unable to address their problems

local inequality and project choice theory and evidence from ecuador this paper provides evidence consistent with elite capture of social fund investment projects in ecuador exploiting a unique combination of data sets on village level income distributions social fund project administration and province level electoral results we test a simple model of project choice when local political power is unequally distributed in accordance with the predictions of the model poorer villages are more likely to receive projects that provide excludable private goods to the poor such as latrines controlling for poverty more unequal communities are less likely to receive such projects consistent with the hypothesis of elite capture these results are sensitive to the specific measures of inequality and elite power used in the empirical analysis and are strongest for expenditure shares at the top of the distribution

the social impact of social funds in jamaica a participatory econometric analysis of targeting collective action and participation in community driven development qualitative data from a case study of the jamaica social investment fund reveal that the social fund process is elite driven and decision making tends to be dominated by a small group of motivated individuals however there is broad based satisfaction with the outcome quantitative data from 500 households mirror these findings by showing that ex ante the social fund does not address the expressed needs of the majority of individuals in the majority of communities by the completion of the project however 80 per cent of the community expresses satisfaction with the outcome an analysis of the determinants of participation reveals that better educated and better networked individuals dominate the process propensity score analysis demonstrates that jsif has had a causal impact on improvements in trust and the capacity for collective action but these gains are greater for elites

productivity growth and the structure of the business cycle abstract over the recent years opportunity cost oc models of growth have argued that recessions are times when firms engage in productivity improving activities because of intertemporal substitu tion this paper tests whether this approach is correct the technique used to disentangle the trend from the cycle is semi structural vector autoregression the results are mildly supportive of the oc theory there tends to be a negative impact of demand shocks on productivity both in the short run and in the long run and the short run impact is stronger in those countries where fluctuations are more transitory however there is no significant response of r d to demand shocks

macroeconomic conditions and the determinants of commercialisation in this paper we focus on the effects of macroeconomic conditions on commercialisation using survey data on the activities of australian inventors who attempted to commercialise 3 736 inventions over the period 1986 2005 we find evidence that macroeconomic conditions have a pro cyclical effect on commercialisation activities such a finding has important policy implications since it suggests that recessions have both short term effects on employment income and long term effects on productivity however the magnitude of the supply side effects the cost of finance and level of public sector research are estimated to be larger than the growth in aggregate or industry demand copyright the author 2010 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

targeting public goods to the poor in a segregated economy an empirical analysis of central mandates in rural india abstract while local governments are increasingly being vested with control over funds for public goods concern over the capture of decentralized funds by local elites has led decentralization to be combined with central mandates which require a certain proportion of funds to directly benefit the poor if local capture is pervasive however central mandates may not be effective despite the popularity of this combination of decentralization and centralized control there is little empirical evidence which separately identifies their effect on investment in public goods and hence assesses the effectiveness of central mandates this paper provides such evidence using data collected by the authors for the north indian state of punjab an economy where economic conditions facilitate such an analysis we find that central mandates are effective enhancing intra village equality in expenditure on public goods this finding informs the debate on the equity effects of centralized versus decentralized programs

inequality and conservation on the local commons a theoretical exercise to analyse the effect of asset inequality on co operation within a group we consider a twoplayer nonco operative model of conservation of a common pool resource overexploitation by one user affects another s payoff by reducing the next period catch we give necessary and sufficient conditions such that conservation is a nash equilibrium and show that increasing inequality does not in general favour full conservation however once inequality is sufficiently great further inequality can raise efficiency thus the relationship between inequality and economic efficiency is u shaped finally we analyse the implications for conservation if players have earning opportunities outside the commons the daily livelihood of vast masses of the rural poor in many countries depends on the success with which common pool resources cprs such as forest resources grazing lands in shore fisheries and irrigation water are managed and on the environmental consequences of their management understanding the factors that lead to success or failure of community management of these resources is thus critical to rural development cpr management is a collective action dilemma a situation in which mutual cooperation is collectively rational for the group as a whole but individual cooperation is not necessarily individually rational for each member one factor that has not always been recognised as critical to the outcome of collective action dilemmas is heterogeneity among the resource users in this paper our attention will be largely restricted to a single but potent kind of heterogeneity inequality in asset ownership olson 1965 hypothesised that inequality might favour the provision of a public good

decentralized targeting of an antipoverty program abstract developing country governments often delegate authority over the targeting of antipoverty programs to community organizations while retaining control over how much goes to each community we offer a theoretical characterization of the information structure in such programs and the interconnected behavior of the various players our model motivates an econometric specification for explaining distributional outcomes results for bangladesh s food for education ffe program indicate that within village targeting improved with program size lower land inequality less remoteness fewer shocks and less private redistribution there is no sign that the center took account of village attributes conducive to reaching the poor

the influence of industry downturns on the propensity of product versus process innovation this article sheds light on how industry fluctuations affect firms propensity to innovate we test two seemingly conflicting arguments that suggest how firms are more or less inclined to engage in innovation activities during industry fluctuations by studying a panel of 622 italian manufacturing firms during the period 1995 2003 we show how differentiating between product and process innovation may help reconcile the theory of opportunity cost of innovation with the cash flow effect argument we find that industry downturns are related to product and process innovation in different ways firms tend to invest in product innovation rather than process innovation in downturns the findings have implications for both theory showing when the opportunity cost of innovation dominates and research design showing the importance of both the input and output measures in innovation studies and how they might influence the results

labor hoarding and the business cycle this paper investigates the sensitivity of solow residual based measures of technology shocks to labor hoarding behavior using a structural model of labor hoarding and the identifying restriction that innovations to technology shocks are orthogonal to innovations in government consumption we estimate the fraction of the variability of the solow residual that is due to technology shocks our results support the view that a significant proportion of movements in the solow residual are artifacts of labor hoarding behavior specifically we estimate that the variance of innovations to technology is roughly 50 percent less than that implied by standard real business cycle models in addition our results suggest that existing real business cycle studies substantially overstate the extent to which technology shocks account for the variability of postwar aggregate u s output

r d expenditure in g7 countries and the implications for endogenous fluctuations and growth abstract the literature on endogenous growth cycles predicts countercyclical r d expenditure aggregate r d expenditure in g7 countries from 1973 to 2000 tends to be procyclical implications for future theoretical research are discussed

state and development the need for a reappraisal of the current literature this essay tries to bring out some of the complexities that are overlooked in the usual treatment of the state in the institutional economics literature and supplement the latter with a discussion of some alternative approaches to looking at the possible developmental role of the state it refers to a broader range of development goals including the structural transformation of the economy and focuses on problems like the resolution of coordination failures and collective action problems the conflicting issues of commitment and accountability and the need for balancing the trade offs they generate some ingredients of state capacity and political coalition building usually missed in the literature the possible importance of rent sharing in a political equilibrium the advantages and problems of political centralization and decentralization and the multidimensionality of state functions that may not be addressed by markets or private firms

endogenous growth and the procyclical behaviour of productivity abstract in this paper a model with endogenous growth is used to explain the procyclical behaviour of productivity periods when the marginal return to goods production is high are associated with low levels of human capital formation and other investment like activities in particular the model successfully explains the surges in productivity exhibited in the uk during wartime and the apparently permanent effect of the level of defence spending on the growth of total factor productivity

inequality is bad for growth of the poor but not for that of the rich the paper assesses the impact of overall inequality as well as inequality among the poor and among the rich on the growth rates along various percentiles of the income distribution the analysis uses micro census data from u s states covering the period from 1960 to 2010 the paper finds evidence that high levels of inequality reduce the income growth of the poor and if anything help the growth of the rich when inequality is deconstructed into bottom and top inequality the analysis finds that it is mostly top inequality that is holding back growth at the bottom

innovative activity over the business cycle this paper examines cyclical patterns of innovative activity in the united kingdom over the period 1948 83 innovative activity turns out to have many of the properties of a random walk but does show a tendency to cluster during booms there is clear evidence of a long term secular relation between the level of innovative activity and the level of economic activity although this may have changed in the 1980s finally the data provide no reason for thinking that these clusters of innovation cause cyclic variations in economic activity but variations in economic activity do granger cause changes in innovative activity copyright 1995 by royal economic society

the cleansing effect of recessions the authors investigate industry response to cyclical variations in demand production units that embody the newest process and product innovations are continuously being created and outdated units are being destroyed although outdated units are the most likely to turn unprofitable and be scrapped in a recession they can be insulated from the fall in demand by a reduction in creation the structure of adjustment costs plays a determinant role in the responsiveness of those two margins the calibrated model matches the relative volatilities of the observed manufacturing job creation and destruction series and their asymmetries over the cycle copyright 1994 by american economic association

cross country evidence on the link between volatility and growth this paper presents empirical evidence against the standard dichotomy in macroeconomics that separates growth from the volatility of economic fluctuations in a sample of ninety two countries as well as a sample of oecd countries the authors find that countries with higher volatility have lower growth the addition of standard control variables strengthens the negative relationship the authors also find that government spending induced volatility is negatively associated with growth even after controlling for both time and country fixed effects copyright 1995 by american economic association