a dynamic tiebout theory of voluntary vs involuntary provision of public goods this paper considers a dynamic model of tiebout like migration between communities that utilize distinct allocation procedures for public goods at issue is whether voluntary or compulsory procedures are more likely to prevail over time we model infinitely lived individuals who make repeated sequential location decisions over one of two communities each community uses a distinct mechanism for allocating public goods the first is one in which contributions are given voluntarily by the citizenry of the community the second is a compulsory scheme by which individuals are taxed proportionately to wealth with the tax determined by a majority vote opportunities to accumulate wealth exist via accumulation of public capital the markov perfect equilibria of the dynamic game are studied our main result shows that when accumulated wealth converges to a steady state individuals locational choices eventually select the involuntary provision mechanism this holds despite the fact that unanimous location in the voluntary provision community may in many cases remain as a nash equilibrium of the static game each period we also describe conditions under which voluntary provision survives these conditions require that accumulation of capital fails to decrease wealth dispersion over time the results are shown to be consistent with findings relating inequality to school choice

trade interdependence the international financial institutions and the recent evolution of sovereign debt renegotiations abstract this paper analyzes the effect of a debtor country s pattern of trade with commercial creditors home countries on the outcome of debt rescheduling negotiations the analysis reveals that a debtor country with more market power has greater leverage in a three way debt rescheduling negotiation that includes the debtor country its creditors and the international financial institutions ifis the paper also considers the effects of the ifi sovereign debt policy on the bargaining power of the parties in debt rescheduling negotiations two bargaining frameworks analyzed and compared in the paper represent the negotiation mechanism at different stages of the ifi sovereign debt policy evolution

women s work sibling competition and children s school performance this research offers an interpretation of the relationship between fertility child spacing family resources and market work by mothers and the subsequent cognitive skills of grade schoolers as reported by their teachers first an approach to fertility as the outcome of a deliberate choice process is developed and then empirical evidence from a small panel of u s households first interviewed in 1975 76 when they had preschool children is presented in a 1981 82 reinterview a supplementary project was that of obtaining teacher ratings of school performance of individual children large family size as measured by the number of siblings of given age and sex in the household during preschool years in 1975 76 has an important negative impact on the child s subsequent grade school performance boy siblings in nearby age ranges have the most negative impact on performance while teenage siblings of either sex have no systematic adverse effect parental resources as measured by income education child care time and a mother s reduced market time are associated with greater cognitive skills and can offset the apparent disadvantage of having siblings in nearby age intervals there appears to be a significant tradeoff between a market career and a home career for women women who have more children spaced over wider age intervals and who devote more time to child care and less to market work presumably get more benefits from their home career in the form of enhanced child development on the other hand full time market work i e hours in the labor market for pay is important for earnings growth of the mother mary corcoran greg duncan and michael ponza 1983 and family income has a favorable effect on school performance so the apparent choices facing women are more equivocal

co2 emissions and income dynamics what does the global evidence tell us this paper analyzes the co evolution of two major determinants of social welfare namely income and carbon emissions in particular by using a distribution dynamics approach based on markov chains we investigate the shape and behavior of the joint distribution of per capita income and carbon dioxide emissions we arrive at several interesting conclusions especially in the context of international negotiations on climate change first evidence does not support theoretical models predicting the existence of a poverty environment trap specifically in the long run two main groups of countries will emerge poor versus polluting countries second the typical development path leads initially to high emission levels and subsequently to high income third the convergence process towards the stationary distribution is very slow finally for carbon emissions whenever it is observed the environmental kuznets curve seems to be only a transitory phenomenon

what big teeth you have identifying the motivations for exclusionary zoning this paper considers whether a number of the motivations for exclusionary zoning usually examined by economists are distinguishable from one another in a general theoretical model the four motivations identified are fiscal zoning public goods zoning consumption zoning and political economic zoning it is demonstrated in a general setting that the motivations are observationally equivalent if the only available information is community composition the most important implication of this finding is that a policy directed at alleviating one motive for zoning inevitably affects other motives the existence of exclusionary zoning does not constitute a prima facie case for any particular intervention rather the true motivations behind the observed pattern of land use and land use controls must be identified

some macroeconomics for the 21st century this note describes a numerical simulation of a model of economic growth a simplified version of robert tamura s 1996 model of world income dynamics based on technology diffusion the model makes predictions for trends in average world income growth and about the evolution of the relative income distribution that accord well with observation the model is used to forecast the course of world income growth and income inequality over the century to come

cheap children and the persistence of poverty this paper develops a theory of fertility that offers an explanation for the persistence of poverty within and across countries if educated individuals have a comparative advantage in raising educated children then parental fertility choice is shown to give rise to a poverty trap in which the poor choose high fertility rates with low investment in child quality moreover the impact of child quality choice on economic performance is amplified by the diluting effect of higher fertility on physical capital accumulation the theory proposes insights regarding the effects of inequality globalisation and life expectancy on economic growth and demographic transitions this paper develops a theory of fertility and child educational choice that offers an explanation for the persistence of poverty within and across countries the joint determination of the quality education and quantity of children in a household is studied under the key assumption that individuals productivity as teachers increases with their own human capital in contrast the minimum time cost associated with raising a child regardless of the child s quality the quantity cost is not affected by parental education as a result the price of child quantity relative to the price of child quality increases with individuals wages in particular for low wage individuals for whom the opportunity cost of time is low children of minimal quality are cheap this assumption therefore generates a comparative advantage for the poor in child quantity whereas high wage educated individuals have a comparative advantage in raising quality children consistent with the well known evidence poor households thus choose relatively high fertility rates with relatively low investment in their offspring s education and therefore their offspring are poor as well in contrast high income families choose low fertility rates with high investment in education and therefore high income persists in the dynasty evidence from the us provided by hanushek 1992 suggests that a trade off between quantity and quality of children does indeed exist hanushek argues that movements in family size could explain over half the variance in some test scores and that the elasticity of achievements with respect to the number of children in the family is 0 03 implying that the annual achievement growth of each child in a family will fall about 2 when a second child is added and about 0 5 when a sixth child is added 1

micro estimates of public spending demand functions and tests of the tiebout and median voter hypotheses responses to questions given to a random sample of michigan households are used to estimate public spending demand functions while income and price elasticities are similar to those obtained from aggregate data positive income elasticities appear to arise because public services are distributed in a prorich manner a relatively small variance in spending demands among urban and suburban communities in metropolitan areas with substantial public service variety suggests that the tiebout mechanism works this interpretation is supported by the fact that actual spending conforms substantially to desired levels in urban areas but less so in rural areas with little public sector choice

individual production community characteristics and the provision of local public services abstract socioeconomic variables reflect differences in individual production functions for such commodities as a personal safety or education where both private goods and community characteristics are inputs to this production government activities are demanded because of their direct impact on community characteristics and indirect contribution to production since each activity affects many characteristics efficient provision depends upon the proper consideration of the cross effects of community activities on characteristics because production functions may differ across demographic groups efficient provision depends upon community demographics and heterogeneity in equilibrium may result a method for indexing public services using community characteristics is suggested allowing the isolation of movements in prices and quantities from expenditure data

the value of children inter generational support fertility and human capital abstract this paper offers robust empirical evidence of a darwinian pro natalist mechanism parents can improve their old age support with an additional child using the incidence of first born twins as an instrument for fertility outcomes i find that chinese senior parents with more children receive more financial transfers and are more likely to co reside with an adult child they are also less likely to work past retirement age the estimated effects are large despite the evidence that adult children from larger families are less educated and earn significantly less interestingly the effect of an increase in the number of children on old age support does not depend on the child s gender

mixed markets and crime abstract this paper specifies and solves a two stage game theoretic model of a mixed market for crime control in the first stage of the model private targets and the government choose levels of policing in the second stage criminals choose targets and the severity of the crimes that they commit the paper s key results are as follows first private policing can both divert crime to targets that lack private protection and also increase the severity of the crime that these less protected targets suffer second an increase in private policing reduces the aggregate expenditure on traditional policing this is an instance of a political incentive externality where private policing affects the objective function of the government specifically it reduces the level of traditional policing that is consistent with the samuelson condition for efficient provision of a public good third the substitution of private for public policing carries with it a change in the technology of policing in effect private policing leads to a shift from enforcement and punishment towards monitoring and target hardening this in turn may lead to an increase in the severity of crime fourth the mixed policing equilibrium is inefficient and in some situations mixing may reduce the utility of all targets

local characteristics and public production the case of education in a long tradition of papers beginning with borcherding and deacon 5 and bergstrom and goodman 3 local government expenditure is viewed as the outcome of a political process in which the utility of the median voter is maximized subject to an appropriate resource constraint expenditures are specified as a function of the median voter s income the tax price and a set of local characteristics representing the tastes of the jurisdiction s residents the tax price variable incorporates the median voter s tax share and unit costs of providing local public services which depend on input prices and population served local variables though included on the demand side as taste factors are assumed to have no effect on the cost of producing local public services in this paper we ask whether local variables affect production costs directly using california data in which taste factors are virtually eliminated from the demand for education expenditure we find that local variables altect the production of education achievement sign y empirical estimates from median voter models in which local variables are

on the measurement of congestion in the provision of local public goods abstract this paper contends that a measurement problem the zoo effect has led to upwardly biased estimates of the degree to which local public goods are subject to congestion the suggestion is that the observed positive correlation between public expenditure and population size reflects in large measure the wider range of services provided in more populous jurisdictions not simply a high propensity of these goods to become congested

examination performance in scottish secondary schools an ordered logit approach this paper analyses the determinants of educational outcomes for scottish secondary schools using an ordered logit model with data on school examination performance for pupils in the last year of compulsory education separate equations are estimated for 1993 1994 and 1998 1999 the empirical results in line with previous british studies underline the importance of family peer group and school influences in determining educational outcomes they cast doubt however on suggestions that there is an optimal size of school

measuring the social value of local public goods an empirical analysis within paris metropolitan area a non linear hedonic model is used to estimate the implicit marginal prices of 17 local public goods in a paris suburban area on an original data set of some 8200 housing units the results reveal a robust effect of local public school quality measured both by the fraction of junior high school students that are at least two years behind grade level and the student teacher ratio on house prices it is observed that housing owners marginal willingness to pay for reducing commuting time is roughly similar for public transportation than for car transportation another noticeable result is the complete capitalization of local taxes at a discount rate of 3 5 an illustration of the potential usefulness of the results for cost benefit analysis is also provided

is the median voter decisive evidence from referenda voting patterns abstract this paper examines whether the voter with the median income is decisive in local spending decisions previous tests have relied on cross sectional data while we make use of a pair of california referenda to estimate a first difference specification the referenda proposed to lower the required vote share for passing local educational bonding initiatives from 67 to 50 and 67 to 55 respectively we find that voters rationally consider future public service decisions when deciding how to vote on voting rules however the empirical evidence strongly suggests that an income percentile below the median is decisive for majority voting rules especially in communities that have a large share of high income voters with attributes that suggest low demand for public services based on a model that explicitly recognizes that each community contains voters with both high and low demand for public school spending we also find that an increase in the share of low demand voters is associated with a lower decisive voter income percentile for the high demand group this two type model implies that our low demand types individuals over age 45 with no children have demands that are 45 lower than other voters collectively these findings are consistent with high income voters with weak preferences for public educational services voting with the poor against increases in public spending on education

corruption fertility and human capital abstract we build an overlapping generations model in which reproductive households face a child quantity child quality trade off and bureaucrats are delegated with the task of delivering public services that support the accumulation of human capital by integrating the theoretical analyses of endogenous growth corruption and fertility choices we show that the negative relation between fertility and economic development may also be affected by differences in the magnitude of bureaucratic corruption

productivity change in state and local governments a model is developed in this paper which allows the growth rate of public sector productivity to be estimated without an explicit measure of sectoral output in this model communities are regarded as generalized households and the goods and services provided by the community s government are interpreted as internally produced household goods the model is then fitted to quarterly data from the u s national income and product accounts and the rate of productivity change is found to average 0 50 per year for the period 1959 1979 the sources of growth approach to productivity measurement distinguishes between the growth in real output due to the growth in factor inputs capital labor materials and the growth in output due to advances in technology managerial practice and other factors related to productive efficiency the former are collectively associated with the movement along an aggregate or sectoral production function while the latter are associated with the shift in that function 2 in practice the shift in the production function is measured by the residual real output not attributed to the growth of the share weighted inputs and termed total factor productivity the sources of growth model is based on the underlying assumption that real output and real input can be measured with a reasonable degree of accuracy while this presumption is correct for many types of economic activity it is essentially incorrect for those sectors which produce services as kendrick 1982 has recently noted approximately one third of the real gross product originating in the service sector of u s private business economy is estimated using employment manhours or labor earnings such procedures systematically misstate the true growth of real output and thus systematically bias the estimated growth in total factor productivity the situation is even worse in the public sector in the u s national income and product accounts the output of general government is defined to be equal to labor input implying that the growth of total factor productivity exactly offsets the effect of nonlabor inputs a model is developed in this paper which allows the growth rate of public sector productivity to be estimated without an explicit measure of sectoral output in this model communities are regarded as generalized households and the goods and services provided by the community s government are interpreted as internally produced household goods this interpretation allows us to appropriate the analytical apparatus of the household production model and thereby permits us to estimate the key parameters of the model including a government total factor productivity parameter without first having to measure the output of the govern

analisis de la eficiencia del gasto municipal y de sus determinantes en este estudio se analizo la eficiencia del gasto local en 1686 municipalidades del pais para elano 2003 mediante la interpretacion de las actividades publicas locales como un proceso de produccion que transforma inputs en outputs bradford et al 1969 y fisher 1996 se establecieron para ello diversas fronteras de produccion construidas a partir de los mejores resultados dentro de grupos de municipalidades y luego se estimo la eficiencia relativa como la distancia a dichas fronteras se utilizaron cinco metodologias para la estimacion de las fronteras de produccion i 3 no parametricas free disposal hull fdh y data envelopment analysis dea crs ydea vrs y ii dos parametricas una deterministica y otra estocastica las cuales se estimaron a traves de las diez categorias de municipalidades cuatro provinciales y seis distritales definidas mediante una metodologia de conglomerados finalmente a partir del empleo de modelos de regresion de tipo tobit se analizaron los determinantes fiscales socioeconomicos y demograficos de los niveles de eficiencia encontrados los resultados obtenidos son diversos y varian segun la categoria del municipio analizado a pesar que fue posible identificar algunas buenas practicas municipales los resultados a nivel nacional son preocupantes puesto que indican que se podria alcanzar la misma provision de bienes y servicios municipales con 57 6 menos recursos entre los principales determinantes de este gasto ineficiente se encontraron las transferencias de los recursos del foncomun y del canon sobre todo a nivel distrital mientras que uno de los factores que permitio una provision mas eficiente de los servicios publicos locales fue la participacion ciudadana aproximada por la presencia de los consejos de coordinacion local en el marco de la promulgacion del decreto supremo 068 2006 pcm en octubre de 2006 por el cual se establece la culminacion de las transferencias de competencias y funciones inicialmente programadas para el periodo 2006 2010 hacia fines del ano 2007 los resultados obtenidos resaltan la necesidad de concentrar mayores esfuerzos para mejorar la eficiencia del gasto a nivel local in this study we analyzed the efficiency of the spending of 1686 peruvian municipalities for the year 2003 through the evaluation to the municipal public activities as a process of production which transforms inputs in outputs bradford et al 1969 and fisher 1996 in doing so we established several best practice production frontiers in order to estimate the extent of municipal spending that seems to be wasted relative to that frontier five methodologies for the production frontier estimations were used i three non parametric i free disposal hull fdh and data envelopment analysis dea crs and dea vrs and ii two parametric one deterministic and the other stochastic which were estimated through ten categories of municipalities four groups of provincial and six of district municipalities defined through a cluster methodology finally using tobit regression models we analyzed the fiscal socioeconomics and demographic determinants of the efficiency levels we found different levels of efficiency and although we identified some good practices the result at the national level is matter of concern because the same results could have been obtained with 57 6 less resources among the main determinants of this inefficiency spending the foncomun and canon transfers were found mainly at the district municipal level one of the factors that allowed for a more efficient provision of local services was the civil participation represented in the study by the local coordination council the results of the study show that there is a need to make more efforts to improve the local government spending even more so after the promulgation of the supreme decree 068 2006 pcm in october 2006 by virtue of which the culmination of the competences and function transfers process initially programmed for 2006 2010 brought forward to the end of 2007

community composition and the provision of local public goods abstract there is considerable evidence suggesting that the composition of the community that is the characteristics of the residents themselves plays a central role in determining levels of important public outputs such as education and public safety this paper explores the normative implications of this evidence we show that optimal community composition involves a trade off between the gains from homogeneity in demands among residents and the gains from heterogeneity in the production of those goods the analysis establishes a role for equalizing intergovernmental grants on efficiency grounds such grants can provide the needed incentives for sustaining heterogeneous communities

schooling and economic well being the role of nonmarket effects standard estimates of the economic value of additional schooling based on earnings differences associated with differences in the level of schooling attained cover only a portion of the total effects of education that are valued by citizens we first identify a catalog of nonmarketed effects many of which have been recently studied by economists and then propose a procedure for estimating a willingness to pay value for these effects using empirical estimates of the magnitude of a selection of these effects found in the literature we calculate willingness to pay values using our proposed procedure these illustrative calculations suggest that standard estimates of the benefit of incremental schooling substantially understate the full value of such investments

heterogeneity of preferences for local public goods the case of private expenditure on public education abstract revealed preference techniques are used to investigate the degree of heterogeneity of local public good preferences by testing the hypothesis that demographic characteristics are correlated with preferences for expenditure on public education the test relies on a goodness of fit index which is on an estimation of wasted consumer expenditure we use bootstrap techniques to estimate the distribution of the test statistic preference heterogeneity is found to be common however democrat protestant households are found to have similar tastes and to a lesser extent so are households with school age children where at least one other trait is held in common republicans exhibit the greatest degree of preference heterogeneity

measuring local government spending efficiency evidence for the lisbon region afonso a and fernandes s 2006 measuring local government spending efficiency evidence for the lisbon region regional studies 40 39 53 the expenditure efficiency of portuguese local governments in 2001 was assessed using data envelopment analysis for production frontier estimation a composite municipal output indicator was constructed and input and output efficiency scores were computed for 51 portuguese municipalities in the region of lisbon and vale do tejo this allows a determination of the extent of municipal spending that seems to be wasted relative to the theoretical best practice frontier the results suggest that vale do tejo municipalities could achieve on average the same level of output allegedly using around one third fewer resources improving performance without necessarily increasing municipal spending municipal expenditure technical efficiency data envelopment analysis dea lisbon afonso a and fernandes s 2006 l efficacite de la depense de l administration locale d

self interest and public funding of education abstract the objective of this paper is to study whether publicly funded education can emerge as a political and economic equilibrium in an overlapping generations economy in which selfish agents vote for public funding of education the presence of complementarities between capital and labor in the production function implies that by improving the skills of next period s workers public funding of education increases the return on capital as a result savers will support a publicly financed education system in order to enhance their future income a version of the model calibrated using u s data generates large shares of gnp allocated to education hence the non altruistic incentive to support public education is quantitatively important

a continuous state space approach to convergence by parts abstract using a continuous state space approach this note extends feyrer s feyrer j 2003 convergence by parts manuscript dartmouth college available at http www dartmouth edu jfeyrer parts pdf study of the proximate determinants of the shape of the long run distribution of income per capita contrary to feyrer s finding of the primacy of total factor productivity tfp the results here imply that traps in both tfp growth and capital accumulation may matter

the economics of schooling production and efficiency in public schools n recent years public and professional interest in schools has been heightened by a spate of reports many of them critical of current school policy these policy documents have added to persistent and long standing concerns about the cost effectiveness and fairness of the current school structure and have made schooling once again a serious public issue as in the past however any renewed interest in education is likely to be short lived doomed to dissipate as frustration over the inability of policy to improve school practice sets in this frustration about school policy relates directly to knowledge about the educational production process and in turn to underlying research on schools although the educational process has been extensively researched clear policy prescriptions flowing from this research have been difficult to derive 2 there exists however a consistency to the research findings that does have an immediate application to school policy schools differ dramatically in quality

equivalence of the core and competitive equilibrium in a tiebout economy with crowding types abstract we propose a new model of a local public goods economy with differentiated crowding the new feature is that taste and crowding characteristics of agents are distinguished from one another we prove that if the economy satisfies strict small group effectiveness then the core is equivalent to the set of tiebout equilibrium outcomes equilibrium prices are defined to depend solely on crowding characteristics this implies that only publicly observable information and not private information such as preferences is needed to induce agents to sort themselves into efficient jurisdictions thus our model allows us to satisfy bewley s 6 anonymity requirement on taxes in his well known criticism of the tiebout hypothesis

the trade off between child quantity and quality an empirical investigation of trade offs between number of children and their scholastic performance confirms that family size directly affects children s achievement though parents show no favori

an analysis of returns to scale in public production with an application to fire protection abstract this paper analyzes returns to scale in public production existing studies fail to differentiate among three dimensions of scale service quality the level of governmental activity and the number of people served a fourth dimension economies of scope is need for agencies that provide multiple services this paper provides a formal definition of returns to scale for each dimension this framework is applied to fire protection using a translog cost function with two services fire prevention and fire suppression the results indicate economies of scope increasing returns to quality scale and constant returns to population scale

a rostovian model of endogenous growth and underdevelopment traps the paper presents a model which combines self sustained growth and underdevelopment traps into a common analytical framework we provide an analytical interpretations to rostow s observation that there is a decisive interval in the history of a society when growth becomes its normal condition and to the empirical evidence that some countries seem not to have achieved this stage yet the model exhibits aggregate non convexities and thresholds which separate a region where growth is solow type with convergence to a stationary steady state from a region where growth is romer type with endogenous self sustained growth in some critical stages of development there exist multiple equilibrium trajectories consistent with alternative sets of self fulfilling beliefs

fiscal and spending behavior of local governments identification of price effects when prices are not observed this paper analyzes local public fiscal andspending behavior in a setting where localgovernments represented by the dominantparty or coalition are treated as utilitymaximizing agents the econometricanalysis which is based on a modifiedversion of eles recognizes total spendingas well as total income as endogenousvariables identification of the priceeffects is achieved by utilizing data onenvironmental cost factors and localtastes the performance of the estimatedmodel is investigated by testing itsability to make out of sample predictionsof local government behavior

r d implementation and stagnation a schumpeterian theory of convergence clubs we use schumpeterian growth theory to account for the divergence in per capita income that has taken place between countries since the mid 19th century as well as for the convergence that took place amongst the richest countries during the second half of the 20th century the argument is based on the premise that technological change underwent a fundamental transformation in the 19th century associated with new scientific ideas and the increasingly scientific content of new technologies countries then sorted themselves into three convergence groups r d implementation and stagnation a country s group membership depends on initial conditions as well as on fundamentals

the empirical analysis of fiscal illusion this paper examines the empirical analysis of the five main hypotheses subsumed under the generic term fiscal illusion after placing these hypotheses within a common theoretical framework the paper attempts to evaluate empirical research into the revenue complexity hypothesis the revenue elasticity hypothesis the flypaper effect renter illusion and debt illusion

interest rates official lending and the debt crisis a reassessment the authors document and try to explain the sizable cross country differences in interest rates on external debt paid by a group of highly indebted developing countries in 1973 89 they find that indonesia and turkey which are often praised for not rescheduling in the 1980s paid interest rates substantially below libor and avoided the interest rate shock of the early 1980s differences in the default risk premium explain some of the variation among countries but different degrees of access to official loans carrying highly subsidized interest rates played the major role in the sample they studied they found no evidence that debt at floating interest rates was more expensive than debt at fixed rates for the period 1981 89 it is possible to control for differences in the currency composition of debt and the results are essentially unchanged these results suggest that studies of economic performance among the highly indebted countries during the debt crisis should control for cross country differences in the burden of interest payments

optimal loan contracts and floating rate debt in international lending to ldcs abstract most ldc debt is at floating interest rate and the wisdom of this choice is analyzed here for a prototype ldc complete insurance requires repayment to increase with export revenues and import prices since the latter variables are positively correlated with libor floating rate debt yields better risk sharing than fixed rate debt and induces more investment in the ldc when default is possible repayment becomes contingent on the cost of sanctions is renegotiation states and some renegotiation costs are likely to be incurred fixed rate debt would have reduced the occurrence of default in the 80s but only marginally

sorting by foot travel for local public goods and equilibrium stratification we re examine tiebout s hypothesis of endogenous sorting in a competitive spatial equilibrium framework by considering both income and preference heterogeneity and by allowing agents to decide endogenously the number of visits to a travel for local public good the equilibrium configuration may be completely segregated incompletely segregated or completely integrated depending on relative market rents and income preference local tax parameters a segregated equilibrium may feature endogenous sorting purely by income or by both income and preferences while the rich need not be closer to the local public facility site multiple equilibria may arise when the equilibrium configuration is incompletely segregated jel classification d50 h41 classification par deplacement biens publics locaux accessibles par deplacement et stratification d equilibre les auteurs reexaminent l hypothese de tiebout de classification endogene dans un cadre d equilibre spatial concurrentiel en tenant compte a la fois de l heterogeneite des revenus et des preferences ainsi qu en permettant aux agents de decider de maniere endogene du nombre de visites pour se procurer un bien public local par deplacement il peut s ensuivre des equilibres de segregation complete de segregation incomplete ou d integration complete selon les rentes relatives et les parametres de revenus de preferences ou de fiscalite locale un equilibre de segregation peut entrainer une classification endogene sur la base seulement des revenus ou sur la base des revenus et des preferences alors que les riches n ont pas besoin d etre plus proches du site du bien public local des equilibres multiples peuvent surgir quand la configuration d equilibre en est une de segregation incomplete

elections and aggregation interpreting econometric analyses of local governments this paper analyzes the provision of local government service under the assumption that fiscal policy is set by local officials in order to maximize the expected number of votes in the next election the model includes both the widely used median voter model and the average voter model as special cases further it is a convenient framework for empirical analyses numerical simulations indicate that the vote maximization model is capable of producing levels of government spending either greater or less than those predicted by the median voter model while exhibiting similar responses to changes in incomes grants prices etc thus the model captures the advantages of the median voter model without its objectionable features many avenues for further work remain i will mention briefly only a few of the most obvious the first is to make housing prices endogenously determined within the model in this way one could examine the role of both fiscal incentives capitalization and political incentives votes in the determination of optimal policies a second extension is to introduce explicitly the possibility of a mobile population and examine in the spirit of tiebout 1956 the effects of voting with your feet within the vote maximization framework the possibilities include both setting policies that de facto concede exit of some fraction of the current residents and or setting policies to attract new residents with particular characteristics another extension is to look at decisions over time despite widespread agreement upon the usefulness of the life cycle model of private consumption the median voter is essentially static it seems a minimal extension to include both government and private consumption in an intertemporal framework unfortunately the median voter may change over time making implementation of the median voter model problematic at best in practice intertemporal issues are important emphasizing the absence of an acceptable framework it is often suggested that elected officials will choose inappropriate intertemporal fiscal policies in response to the short run focus of the electoral process for example it appears plausible that officials will borrow in order to finance higher levels of spending and or lower taxes in the present because future residents are not present to vote against these policies the electoral process produces incorrect incentives in the same way this line of reasoning suggests that officials will undertake too little infrastructure investments because the benefits accrue to future residents one countervailing force is the effects of property capitalization to the extent that the local housing market correctly capitalizes future taxes and services into housing values current residents will be affected by inefficient policies and may use the electoral process to provide correct signals to officials there is another possibility as well to the extent that current officials recognize that inefficient current policies reduce the probability of future re election they have an incentive even in the absence of perfect capitalization to adopt intertemporally appropriate tax and spending policies intuitively the official must care about re election what if the particular individual chooses not to run for office again then to the extent that political parties or machines cause the individual to value the election of his successor i e to the extent that political legacies are important the adopted policies may satisfy the conditions for intertemporal efficiency the vote maximization approach provides a framework in which to analyze these issues lastly one could extend the model to situations in which officials care not only about election but also about the policies themselves this provides not only a different tradeoff between the tastes of the public and private sector but also a natural incentive for officials to seek re election

occupational variation in quantity quality trade off in a brawn based economy the paper revisits the theory of the quantity quality trade off and demonstrates that the relationship between quantity and health of children is subject to occupational variation in physical energ

renter illusion fact or fiction the renter illusion hypothesis holds that renters underestimate their property tax burden and therefore support excessive levels of local expenditure a number of studies have reached results that are consistent with the hypothesis but so far empirical investigations have proceeded from the assumption that renter illusion is a fact and have investigated the implications of this fact no one has investigated renter illusion as such in other areas of fiscal illusion survey analyses of voter perceptions have yielded considerable insight into the validity of illusionary hypotheses this paper follows this method and investigates a representative sample of 1000 danish renters and home owners perception of the local property tax system the evidence raises doubts about the renter illusion hypothesis the survey findings are corroborated by an analysis of property taxation in danish municipalities

equity and efficiency in human capital investment the local connection a general model of community formation and human capital accumulation with social spillovers and decentralized school funding is used to analyse the causes of economic segregation and its consequences for equity and efficiency significant polarization arises from minor differences in endowments preferences or access to capital markets this makes income inequality more persistent across generations but the same need not be true for wealth equilibrium stratification tends to be excessive resulting in low aggregate surplus whether state equalization of school resources can remedy these problems hinges on how purchased social and family inputs interact in education and in mobility decisions

political markets property tax referenda and local school spending for better or worse fiscal decisions made through property tax referenda allow local political markets to work demand supply and voting process components of such markets are estimated for those oregon k 12 school districts that held referenda between 1981 and 1986 various attributes of the median voter were related to school spending but supply decisions by school boards and administrators were also important large districts used state aid to substitute for local property tax revenues on nearly a one for one basis while relying on reversion budgets inadequate property tax bases and implicit threats of school closures to extract greater than desired spending levels from the median voter

disentangling the demand function from the production function for local public services the case of public safety abstract in this paper we develop a theoretical framework and an econometric model which allow us to separate the effect of income and other socioeconomic variables on the demand for publicly provided goods from their effect on the price of those goods we apply our approach in a study of expenditures for police protection in a cross section of 73 u s cities and counties our results suggest that studies of public expenditures which fail to incorporate community characteristics in production and cost functions can yield very misleading results

the flypaper effect and other anomalies abstract i develop a model in which income both in its own right and as a proxy for other socioeconomic characteristics is an input in the production function for local public services the most obvious example is education though there are other applications as well the comparative statics results from this model yield the following results 1 the observed flypaper effect the tendency for local government to spend a higher fraction of unrestricted grants than income of residents may be due at least in part to the fact that own income but not grants is a substitute for purchased inputs in the technology hence the propensity to spend on purchased inputs out of own income is lower than out of grants 2 the income elasticity of demand for public sector output may be higher than the observed income elasticity of demand for purchased inputs 3 equalization of educational opportunity via wealth neutrality as suggested by feldstein requires major changes in education finance once we recognice the distinction between purchased inputs and output

equilibrium and inefficiency in a community model with peer group effects public service output depends on input expenditures on own personal characteristics and on the characteristics of the other residents in the community the peer group effect in a community model with public expenditures set by voting with migration between communities and with land price differentials capitalization it is shown that communities may become heterogeneous in composition and second best inefficient this equilibrium occurs when the peer group effect is neither too strong nor too weak the inefficiency arises because an externality is created by migration the land price differential does not play the part of the price of the better peer group but of a transfer payment

subsidies as sorting devices abstract the divergence between tax payments and the cost of providing public services that arise from financing local public services provides an incentive for higher income communities to deter the entry of lower income households into their community here we demonstrate that higher income households to insure that low income households do not enter their community or reduce the number that do enter subsidize goods consumed by higher income households more than by lower income households this strategy will make the rich community less attractive to the poor deterring their entry to the community

property taxation and local public spending the renter effect the point of departure for this study is the pervasive finding that other things equal local jurisdictions tend to spend more on local services the larger the fraction of renters among their residents this paper seeks to determine the approximate magnitude of this renter effect by posing the question how much smaller would local public budgets be if all residents were home owners making use of two quite different approaches the paper finds a typical renter effect on local public expenditure on the order of ten percent this finding suggests that we might do well to reform the administration of the property tax so that changes in property tax liabilities on rental dwellings are directly and visibly transformed into changes of monthly rental payments

public sector performance move or monitor governmental performance is a concern of citizens and politicians alike a specific interest is public sector waste which is thought to be pervasive and efforts to improve public sector performance are believed to be minimal economists have studied the topic extensively this paper discusses options on measuring public sector performance in urban areas and it also suggests certain public policy options that i believe deserve additional attention from a citizen s point of view when public service performance declines one can leave the jurisdiction this exit option has a substantial historical precedent in the united states going back to at least the landing of the mayflower in the urban public finance literature this is a consequence of the tiebout 1956 model in which there are a sufficient number of jurisdictions among which individuals may choose to live and people vote with their feet the model suggests that exit or the threat of exit leads to competitive forces that improve efficiency in the public sector an alternative to exit comes about through monitoring and voting monitoring and voting are attractive ways to effect change for individuals who do not want to exit as suggested by davis and hayes 1993 a fairly simple model can demonstrate the demand for good government there is a literature that examines the motives for exit dowding and john 1996 which points out and concludes that people may not move in response to the fiscal decisions of local governments perhaps voting and monitoring are more attractive options at least to a proportion of the population 2 this paper explores the move monitor trade off in influencing urban public sector performance although heuristic arguments can be made concerning the relative importance of moving or monitoring few researchers have investigated when if ever move and or monitor are effective means of improving public sector efficiency in this paper i would like to suggest that there are gaps in the literature proposing topics or future research

local government structure and urban residential location the large research literature on the tiebout model has developed with little attention paid to the urban economic structure in which local government functions this paper attempts to examine the theoretical consequences of local jurisdictions functioning within a conventional monocentric urban model it also discusses a mathematical formulation of a two jurisdiction linear city in which the local service level and local property tax rate might be used as strategic variables in a game theory sense it is concluded that for this to happen the local service level has to have more than one element which is intuitively appealing some references are developed to current british local government and possible changes

on the evolution of the world income distribution the post world war ii period has seen substantial changes in the distribution of gdp per worker around the world in the upper half of the distribution a number of countries have exhibited large increases in income relative to the richest countries in the bottom half several countries have seen incomes fall relative to the richest countries the net result of these changes is a movement in the shape of the world income distribution from something that looks like a normal distribution in 1960 to a bi modal twin peaks distribution in 1988 projecting these changes into the future suggests a number of interesting ndings first it seems likely that the united states will lose its position as the country with the highest level of gdp per worker second growth miracles have been more common in recent decades than growth disasters if these dynamics continue the future income distribution will involve far more rich countries and far fewer poor countries than currently observed

homogeneity tests of tiebout sorting a case study at the interface of city and suburb the tiebout hypothesis has stimulated 50 years of research into the relationship between residential location and local taxes and services one line of research has focused on socioeconomic homogeneity as an indicator of tiebout sorting i argue that spatial dependence of socioeconomic variables confounds attempts to attribute sorting to tiebout processes socioeconomic sorting is investigated in queens and nassau counties ny one a jurisdictionally unified central city the other a jurisdictionally fragmented suburban county socioeconomic differences between neighbouring census tracts are quantified throughout the study area and regressed on variables representing general purpose local governments and school districts there is strong evidence of income sorting across small suburban municipalities while the evidence of income sorting across school districts is ambiguous i conclude that income sorting may not be as important at the school district level as generally believed and previous research may have misattributed the political scale of household choice

majority rule and the public provision of a private good this paper extends the literature on the socialization of commodities by developing a model of voting over the public provision of a private good health care

is foreign debt portfolio management efficient in emerging economies abstract this paper develops a simple model of foreign debt portfolio management the model suggests that under mild conditions the currency composition of a country s foreign debt portfolio is responsive to exchange rate movements empirical evidence is provided for a panel of 14 emerging economies in the period 1970 1998 attention is focused on the stocks of foreign liabilities denominated in us dollars deutschemarks dm japanese yen and swiss francs the results of the empirical analysis show that foreign debt portfolio management has been sub optimal in the countries under examination in these countries the currency composition of foreign debt has not reflected a substitution effect away from the currencies that have appreciated over time vis a vis the us dollar

population technology and growth from malthusian stagnation to the demographic transition and beyond this paper develops a unied growth model that captures the historical evolution of population technology and output it encompasses theendogenous transitionbetween three regimes that have characterized economic development the economy evolves from amalthusianregime wheretechnologicalprogressis slow andpopulationgrowthprevents anysustainedriseinincomepercapita intoapost malthusianregime wheretechnological progress rises and population growth absorbs only part of output growth ultimately a demographic transition reverses the positive relationship between income and population growth andtheeconomyentersamoderngrowthregimewithreducedpopulationgrowth

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

peer group effects and educational attainment abstract given the aims of an educational system the relationship between educational inputs and educational outputs the educational production function a frequency distribution of students by ability and a fixed educational budget how should students and educational expenditures be allocated over classrooms the paper focuses on peer group effects which capture the influence of a student s classmates on his educational attainment and the determinants of whether streaming or mixing is preferable it should be noted that peer group effects arise in other contexts notably in the workplace thus the paper casts some light on the optimal composition of teams

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

the role of multilateral institutions in the market for sovereign debt creditor country governments have an interest in avoiding defaults by sovereign debtors because default sanctions may be costly to their citizens as a result a standard bargaining model predicts that debtors do not repay in equilibrium even if the threat of sanctions is credible on the part of the banks by contracting with a third party such as a multilateral institution with some degree of independence creditor country governments can precommit not to intervene in equilibrium when debt renegotiation occurs the sovereign receives a subsidy from the multilateral agency the model is used to interpret recent debt reduction operations

nonlinear economic growth some theory and cross country evidence abstract this paper aims to test the existence of different growth regimes that is of different relationships between growth rate and income level we propose a simple nonlinear growth model and test its empirical implications by estimating markov transition matrices and stochastic kernels we show that growth is indeed nonlinear a first phase of slow or zero growth is followed by a take off and finally by a phase of deceleration we discuss the relevance of these results with respect to the issue of convergence and reversibility of development in the light of models of structural change and technological diffusion

a political economic analysis of labor migration and income redistribution we present a two country political economic model of income redistribution with internationally mobile labor migration can be exogenous and or endogenous i e determined by labor income differentials political influence is determined by the size and homogeneity of the groups where the latter can be affected by immigration we show that immigration can increase the transfers to and the income of the mobile group we also investigate the possibility of migration regulation tax transfer policy competition and coordination and finally coordination of regulation policies it is shown that the selection of any of those regimes will depend on the particular distribution of political influence among the relevant social groups in the two countries

a specification test for choosing the right public good price this article compares statistically three popular public good price definitions the bias of parameter estimates under the wrong definition is derived and calculated one definition is found to be clearly inferior whereas bias estimates indicate little difference between the two remaining definitions public good demand elasticities and their variances are calculated to demonstrate the importance of choosing the right price definition