reaction or interaction spatial process identification in multi tiered government structures abstract this paper models horizontal and vertical fiscal externalities in a multi tiered structure of government and implements maximum likelihood and instrumental variables estimation techniques to identify the source of spatial dependence in english local government expenditures the results show that when vertical fiscal externalities among upper tier county authority and lower tier district authority expenditures are explicitly taken into account the estimated magnitude of inter district fiscal interactions is substantially reduced the observed positive spatial autocorrelation among district expenditures can consequently be attributed to a large extent to common reaction to county fiscal policies rather than to actual strategic interaction

voter preferences and state regulation of smoking i introduction tobacco taxation and smoking restrictions are two areas of regulation for which states have maintained a high level of control relative to the federal government 1 given this flexibility states have established a wide range of restrictions on smoking in areas such as government workplaces restaurants bars shopping malls indoor arenas and hospitals 2 although most states restrict smoking in hospitals there is considerable variation among states in restrictions in other areas in the 1998 99 period of this study about two thirds of states restricted smoking in restaurants whereas only four states restricted smoking in bars what has led to variation in smoking restrictions across states in a democratic society one would expect voter preferences to play an instrumental role in determining which policies are enacted and which are not this article provides the first empirical exploration of whether state level smoking restrictions are consistent with preferences of the citizenry taking into account both voting behavior and the role of smoking status in influencing whether an individual votes specifically we examine whether voters preferences for smoking restrictions in restaurants bars malls indoor sporting events and hospitals are consistent with state level restrictions on smoking in each of these public areas 3 our research draws on public choice models of policy making by state and local governments voters preferences typically play a central role because voting affects legislators incentives to support regulations 4 public choice research also finds that nonvoter factors may influence state and local policy making 5 in the case of smoking regulations public health advocates or tobacco industry lobbyists might influence regulatory policies the specific building block of our analysis of state restrictions on smoking is information on individuals voting behavior which we link to their smoking status and preferences over smoking restrictions our analysis uses measures of political pressure that account for individual preferences as well as their voting behavior to examine the possible role of interest group pressures we also control for nonvoter influences on smoking regulation including the proportion of the state population who smoke measures of state ideology and size of the tobacco industry with the exception of smoking in bars there is majority support for smoking restrictions unsurprisingly smokers are less supportive of restrictions than are nonsmokers nonetheless even smokers demonstrate a high level of support for many restrictions smokers are also less likely to vote than are nonsmokers even after controlling for other demographic factors the lower voting rate diminishes voter opposition to antismoking regulation but is usually not critical in view of the substantial support that most smoking restrictions have among smokers the political pressure indices for restrictions on smoking in each public area are generally significantly related to the probability that a state restricts smoking in that public area the nonvoter factors such as the smoking rate in the state and tobacco s role in the state economy are rarely influential policy debates over the desirability of smoking restrictions emphasize possible health risks due to exposure to environmental tobacco smoke ets and effects on business profitability the primary argument for expanding smoking restrictions is to protect workers and customers from exposure to ets 6 as our results show voters are generally supportive of smoking restrictions in public areas which would thereby protect workers as well as themselves and other customers however there is a substantial controversy over the extent of health risks associated with exposure to ets the basis for the push by the u s occupational and safety health administration osha for increased smoking restrictions to protect workers is the highly controversial u

tax base effects and fiscal externalities of local capital taxation evidence from a panel of german jurisdictions abstract this paper provides empirical evidence on the tax base effects of local capital taxation using a large panel of german municipalities it tests whether both the local tax rate and the tax rate in adjacent jurisdictions affect the local tax base the results obtained from a spatial gmm approach confirm a strong negative impact of the local tax rate whereas the average tax rate of neighboring municipalities proves insignificant only if interacted with the relative population size of neighbors a significant positive impact is found indicating that externalities from taxing decisions of adjacent jurisdictions are experienced only by relatively small municipalities

policy innovation in local jurisdictions testing for neighborhood influence in school choice policies before making difficult decisions individuals tend to collect information on decision makers in reference groups with respect to policy innovations in a decentralized public sector this may give rise to positive neighborhood influence on adoption decisions in this paper u s school district data are used to show that decision makers indeed are heavily affected by decision makers in reference groups the policy innovation under consideration is inter district public school choice the results suggest that if a given district s neighbors expected benefits from adopting school choice policies increase this substantially increases the original district s probability of adoption the paper thus supports the view that the diffusion of policy innovations is stimulated by horizontal interaction among local governments

decentralization and intra country transfers in the great recession the case of the european union empirical evidence is found supporting the assignment of the redistribution function to the central government viewing the great recession or recessions in general as a shock it is found that a

are corruption and taxation really harmful to growth firm level evidence exploiting a unique data set containing information about the estimated bribe payments of ugandan firms the authors study the relationship between bribe payments taxes and firm growth in uganda for the period 1995 97 using industry location averages to circumvent the potential problem of endogeneity and to deal with issues of measurement error they find that both the rate of taxation and the rate of bribery are negatively correlated with firm growth for the full data set a one percentage point increase in the bribery rate is associated with three percentage point reduction in firm growth an effect about three times that of taxation moreover after excluding outliers the authors find that bribery has a much greater negative impact on growth and taxation a considerably smaller one this provides some validation of firm level theories of corruption which posit that corruption retards development even more than taxation does

accounting for the decline in afdc caseloads welfare reform or the economy we use state level monthly panel data to assess the relative contributions of the macroeconomy and welfare reform in accounting for the 1993 96 decline in aid to families with dependent children afdc caseloads our results suggest that the decline in per capita afdc caseloads is attributable largely to the economic conditions in states and not to waivers from federal welfare policies nationwide we attribute 66 percent of the decline to the macroeconomy however we do find substantial heterogeneity in the impact and timing of alternative waivers on afdc caseloads states with waivers impacting parental responsibilities experienced greater caseload declines than states with waivers that made work more attractive overall our model predicts that had it not been for the influence of economic factors welfare reform would not have led to any decrease in aggregate caseloads

nash equilibria in models of fiscal competition abstract this paper analyzes nash equilibria in a simple model of an economy with jurisdictions engaging in fiscal competition small number nash equilibria in which tax rates are the strategic variables are shown not to coincide with nash equilibria in which public expenditure levels are the strategic variables

testing the taxmimicking versus expenditure spill over hypotheses using english data spatial interaction among local governments in tax setting and public spending decisions is receiving increasing attention in the applied public economics literature spatial interaction models rely on the presence of an externality from local budget making in traditional public finance models external effects originate either from interjurisdictional resource flows due to tax competition for a mobile base or from local public expenditure spill overs into neighbouring jurisdictions however the recent political agency yardstick competition literature has stressed the role of informational externalities between neighbouring jurisdictions and predicted tax mimicry at the local level the actual relevance of the above hypotheses clearly needs to be assessed empirically in this paper an attempt is made at discriminating between alternative sources of local fiscal interaction by using data on the english municipal authorities budgets while both public spending levels and local property tax rates ex

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

an empirical analysis of intergovernmental tax interaction the case of business income taxes in canada both federal and provincial governments in canada levy corporate taxes on busi nesses in their jurisdictions which potentially gives rise to horizontal and vertical tax exter nalities within the federation using a simple model of interdependent tax choices we estimate tax setting functions for the federal government ontario quebec and an aggregate of the remaining eight provinces we find evidence of significant vertical and horizontal tax inter actions provincial tax rates respond negatively to the federal tax rate while at least some provinces increase their tax rates in response to increases in the tax rates of other provinces

spatial patterns in local taxation tax mimicking or error mimicking this paper tests for mimicry in local tax setting by using a panel data set of the english non metropolitan districts in the 1980s when property tax rate variability across districts was highest the results confirm the presence of large and significant spatial interactions among districts even after allowing for district specific and time effects a district appears to be significantly affected by its neighbours policies a 10 increase in the local property tax rate of a district s neighbours leads to an increase of 4 5 in its own property tax rate on the other hand the absence of correlation in tax rates between lower tier district authorities and upper tier county authorities suggests that the spatial pattern in district tax rates is not simply driven by spatially auto correlated shocks

the rise of the states u s fiscal decentralization in the postwar period article i nfo article history one of the most dramatic changes in the fiscal federalism landscape during the postwar period has been the rapid growth in state budgets which almost tripled as a share of gdp and doubled as a share of government spending between 1952 and 2006 we argue that the greater role of states cannot be easily explained by changes in tiebout forces of fiscal competition such as mobility and voting patterns and are not accounted for by demographic or income trends rather we demonstrate that much of the growth in state budgets has been driven by changes in intergovernmental interactions restricted federal grants to states have increased and federal policy and legal constraints have also mandated or heavily incentivized state own source spending particularly in the areas of education health and public welfare these outside pressures moderate the forces of fiscal competition and must be taken into account when assessing the implications of observed revenue and spending patterns

does smart growth matter to public finance this paper addresses four fundamental questions about the relationship between smart growth a fiscally motivated anti sprawl policy movement and public finance do low density spatially extensive land use patterns cost more to support if so how large an influence does sprawl actually have how does the influence differ among types of spending and how does it compare with the influence of other relevant factors the analysis which is based on the entire continental us and uses a series of spatial econometric models to evaluate one aggregate total direct and nine disaggregate education fire protection housing and community development libraries parks and recreation police protection roadways sewerage and solid waste disposal measures of spending provides the most detailed evidence to date of how sprawl affects the vast sum of revenue that local governments spend every year

migration and income redistribution responsibilities this study examines whether afdc benefits determine or discourage state to state migration flows in the united states a pooled cross section time series model is developed to estimate afdc benefits in a state and recipients and whether benefits in one state affect benefits in other states a second model using data from the 1980 census and the panel study of income dynamics estimates migration of afdc recipients and the level of benefits in in migration and out migration states both models indicate that small but statistically significant amounts of migration occur which may be quite important but only in the long run movers although small in number are much more likely to move to a state with higher benefits states perceive this migration as important indicating that states should have less control and the federal government more control over income redistribution

rent seeking and tax competition abstract regional or local governments often appear to favour the interests of those who own land in the region here the implications of this sort of policy making are modelled formally people are assumed perfectly mobile between regions but are assumed to own land only in the region of their birth the nash equilibrium is shown to be efficient if and only if no migration of capital or labour is needed to achieve efficiency otherwise tax competition leads to too little migration voluntary inter regional transfers will never arise in equilibrium despite the inefficiency of the nash equilibrium when there is migration a higher level of government cannot alter the equilibrium if regional governments choose policies simultaneously after the federal government has committed to its policies

a predictive index for the flypaper effect abstract it is well established that lump sum public grants boost local government spending more than an equivalent increase in private income the flypaper effect one shortcoming of the related literature is that it presumes all communities have an identical propensity to consume from an intergovernmental grant this paper is one attempt to allow for a heterogeneous response the working conjecture is that government expenditure on administrative overhead is a gauge of voter control over fiscal decisions high overhead spending implies a lower provision of public services and a stronger role for revenue maximizing forces in the budget setting process as such the flypaper effect should be more marked in high overhead communities an overhead index is applied to a sample of pennsylvania communities in the philadelphia metropolitan area it is difficult to understand these governments spending propensities from various windfall revenues without the help of the overhead index supportive evidence for this approach because overhead data is widely available the technique here can be used to address important policy questions such as predicting variations in state government responses to the recently created lump sum welfare grants

unobservable effects and business performance while unobservable factors such as corporate culture access to scarce resources management skill and luck can be postulated to be principal determinants of business success their effects are all but ignored in studies of business performance this study making use of the pims data base reports empirical evidence indicating that failure to control for unobservable factors influencing profitability both biases and exaggerates the effect of strategic factors indeed the influence of unobservable factors is so pervasive as to invalidate many of the conclusions drawn from studies failing to control for their effects

international portfolio analysis and strategy the challenge of the 80s this paper suggests an operational approach to strategic planning for international marketing using a portfolio perspective the need for such a perspective is discussed followed by an examination of current approaches to international business portfolio analysis and strategic planning a new approach to international portfolios based on a combined stochastic dominance and analytic hierarchy process approaches is suggested the data requirements and analysis of this approach are outlined and the issues and challenges in the design and implementation of an international business portfolio system are discussed

modeling response to advertising and pricing changes for v 8 cocktail vegetable juice this paper is based on a series of studies undertaken for v 8 cocktail vegetable juice over a five year period the studies were a consequence of management questions regarding the effectiveness of a new advertising campaign the best media mix for this campaign and the apparent wear out of the advertising copy the studies included controlled experimentation estimation of advertising response functions and exploration of price sensitivity following major price increases by v 8 it was found that the short term response to advertising was s shaped and that the new creative approach rather than expenditure levels alone accounted for by far the largest component of the impact of advertising on sales it was also found that for a short period following the major price increases v 8 became extremely price sensitive however after about six months the marginal impact of price returned to historical levels the application of results at campbell soup company their relationship to the literature and their implications for both researchers and practitioners are discussed

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

the local distribution of endowments matters modelling tax competition with heterogeneous local residents this study expands on the tax competition literature by incorporating the heterogeneity of resource endowments into the tax competition framework it theoretically elaborates that the local distribution of resource endowments affects both the level of tax rate and the degree of spatial dependence in tax competition and empirically confirms the theory using the data for 60 urban municipalities in the seoul metropolitan area sma korea in the years 2004 2006 a spatial panel model for tax cut confirms the presence of tax competition in the sma and the effects on tax cut of the resource endowment distribution another regression model for local indicators of spatial dependence uncovers the fact that the spatial dependence in tax cut is also determined by the local endowment distribution

are foreign owned firms more likely to pay bribes than domestic ones evidence from emerging markets summary an extensive literature exists on the adverse effects of corruption on inward fdi and the impact this may have on economic development but the reverse causality has not been fully explored legislation in the us and the eu prohibits firms from engaging in corrupt practices in foreign countries and this suggests that foreign owned firms might be less likely to pay bribes however such legislation may be ineffective because foreign firms have to adapt to local market conditions or risk being uncompetitive using firm level data for 41 emerging countries a probit model estimates the probability that a firm pays bribes to allow for possible endogeneity this probit analysis is repeated with an instrument to proxy for endogenous foreign ownership then a propensity score matching technique tests for differences in the propensity to pay bribes by domestic and foreign firms the paper finds no difference in the behavior of foreign owned and domestic firms with respect to corrupt practices results are robust to different levels of foreign ownership and support the view that foreign owned firms adapt to local practices and are neither more nor less likely to pay bribes than comparable domestic firms the paper finds that other variables including bureaucracy government contracts and perceived difficulties with civil society legal and political do have statistically significant effects on increasing bribery and that some others such as per capita gdp tend to reduce bribery the study concludes that there is no evidence that foreign ownership after investment has occurred tends to reduce bribery but it does support the view that foreign owned firms adopt local behavioral norms

tax competition and the choice of tax structure in a majority voting model abstract this note studies the choice of tax structure in a majority voting model with tax competition regions may tax mobile capital or immobile labor individuals differ with respect to their relative endowments of labor and capital even though a lump sum tax is available the equilibrium capital tax in a jurisdiction may be positive in a symmetric equilibrium this will be true if the median capital endowment is smaller than average

optimal fiscal policy for a state or local government abstract state and local government services are enjoyed by and taxes borne by two groups residents and non residents this paper addresses the question if state and local governments maximize their residents welfare and cannot distinguish between individual residents and non residents but know the aggregate characteristics of the two groups what set of taxes subsidies and public goods should they choose some of the results obtained are i even when all commodities are taxable and equity is ignored the existence of non resident consumption makes uniform taxation non optimal ii in some cases whether a commodity should be taxed or subsidized is independent of its own price elasticity iii central cities may be subsidized by suburban residents and iv the ability of state and local governments to redistribute is inversely proportional to the openness of the economy

understanding corruption and firm responses in cross national firm level surveys the issue of corruption is important to politicians citizens and firms since the early 1990s a large number of studies have sought to understand the causes and consequences of corruption employing firm level survey data from various countries while insightful these analyses have largely ignored two important potential problems nonresponse and potential false response by the firms we argue that in politically repressive environments firms use nonresponse and potential false response as self protection mechanisms corruption is likely understated in such countries we test our argument using the world bank enterprise survey data of more than 44 000 firms in 72 countries for the period 2000 2005 we find that firms in countries with less press freedom are more likely to provide nonresponse and false response on the issue of corruption therefore ignoring these systematic biases in firms responses could result in serious underestimation of the severity of corruption in politically repressive countries more important these biases are a rich and underutilized source of information on the political constraints faced by the firms firm managers can better evaluate levels of corruption not only by truthful answers to corruption questions but also by nonresponses and false responses to such questions

interjurisdictional capital mobility fiscal externality and a corrective subsidy abstract recent studies emphasize that local property taxation may result in inefficiently small amounts of local public spending this paper shows that the inefficiency can be traced to a fiscal externality when one jurisdiction increases its taxes it causes a flow of capital to other jurisdictions that increases their tax revenues the inefficiency can be corrected with a subsidy that internalizes the externality key empirical parameters determining the magnitude of the externality are identified illustrative calculations indicate that subsidy rates on the order of 40 might be required to achieve efficiency

budget spillovers and fiscal policy interdependence evidence from the states abstract this paper formalizes and tests the notion that states expenditures depend on the spending of similarly situated states we find that even after allowing for fixed state effects year effects and common random shocks among neighbors a state government s level of per capita expenditure is positively and significantly affected by the expenditure levels of its neighbors ceteris paribus a one dollar increase in a state s neighbors expenditures increases its own expenditure by over 70 cents

stratport a model for the evaluation and formulation of business portfolio strategies a decision support system to evaluate and formulate business portfolio strategies is proposed strategies are expressed in terms of market share objectives to be achieved in each of the n business units in the portfolio stratport evaluates a strategy in terms of the net present value of its after tax cash flows in the long term as well as its short term net cash flow implications risk considerations are incorporated as per the capital asset pricing model the model explicitly considers marketing investment capacity expenditures working capital and the impact of experience on costs and revenues over a time horizon the formulation of strategy is accomplished by maximizing long term profit subject to a short term net cash flow limit with the maximization repeated over a range of values for the short term net cash flow limit the use of the generalized lagrange multiplier permits the simultaneous optimization of n market shares to be accomplished more efficiently by n univariate maximizations although the function that is maximized in the univariate maximization is not unimodal the newly proposed procedure guarantees that a global maximum will be found limitations of the model and some extensions to minimize their impact are discussed

the politics of public provision of education public provision of education is usually viewed as a form of redistribution in kind however does it arise when income redistribution is feasible as well i analyze a two dimensional model of political decision making with endogenous political parties society chooses both the tax rate and the allocation of the revenues between income redistribution and public education agents differ in their income and in their age where young agents prefer public education and the old prefer income redistribution i find that when the cohort size of the young is not too large then public education arises as a political compromise between the rich and the young segment of the poor they collude in order to reduce the size of government which benefits the rich and target some of its resources to education which benefits the young poor when the cohort size of the young is too large however income redistribution crowds out public provision of education in the political equilibrium

interdependence in the technology adoption decision among municipalities this study examines the interdependence among municipalities in the discrete decision to adopt internet technology results from probit specifications with interaction effects suggest that cities are influenced by nearby neighbours with similar population size in developing a website evidence is also presented indicating interaction among municipalities in the decision to use internet technology to facilitate financial transactions

who offers tax based business development incentives abstract many american communities seek to attract or retain businesses with tax abatements tax credits or tax increment financing of infrastructure projects tifs the evidence for 1999 indicates that communities are most likely to offer one or more of these business development incentives if their residents have low incomes if they are located close to state borders and if their states have troubled political cultures ten percent greater median household income is associated with a 3 2 lower probability of offering incentives 10 greater distance from a state border is associated with a 1 0 lower probability of offering incentives and a 10 higher rate at which government officials are convicted of federal corruption crimes is associated with a 1 2 greater probability of offering business incentives tifs are the preferred incentive of communities whose residents have household incomes between 25 000 and 75 000 whereas tifs are much less commonly offered by communities whose residents have household incomes below 25 000 the need to finance tifs out of incremental tax revenues may make it infeasible for many of the poorest of communities to use tifs for local business development

government decision making and the incidence of federal mandates abstract this paper analyzes the effects of federally mandated program changes on state spending and revenues incorporating and evaluating the predictive value of several common theories of the state decision making process using several sources of exogenous increases in public medical spending i estimate that the entire state portion of the burden of mandated spending is borne by decreases in other public welfare spending while federal mandates may influence the composition of benefits at the state level it is much more difficult for them to change the total level of state transfers comparison of state reactions to different shocks suggests that these reductions are due in part to the substitutability of programs in the voter utility function but also in part to the stickiness of spending within budget categories states with greater racial differences between recipients and voters and states with less generous neighbors reduce other public welfare spending by even more alleviating the burden the medical expansions imposed on their taxpayers mandates may thus serve only to increase inequality across states

marketing production decisions in an industrial channel of distribution this paper presents a model that considers the interface between marketing and production decisions in a channel of distribution of industrial goods comprised of a manufacturer and a distributor the key issue investigated is the nature of the coordination within the channel in light of an unstable pattern of seasonal demand the investigation which focuses on dynamic issues considers production activities such as product delivery and inventory policy and their link to marketing strategies such as pricing policies the focus here is on the dynamic nature of the coordinational aspects of the various policies for example the following questions are addressed what is the distributor s pricing strategy throughout the season what is the nature of the contractual price in the channel under what conditions should the distributor carry no inventory throughout the seasonal period under what conditions should the manufacturer carry no inventory what is the impact of the seasonal parameters and differing h

income redistribution in a federal system the question of the appropriate level of government to undertake income redistribution is receiving renewed attention from economists the standard argument about the issue might be summarized as follows 1 interstate migration of taxpayers and transfer recipients raises the cost to voters of income redistribution at the state level above the cost at the federal level 2 statewide redistribution confers spillover benefits to residents of other states 3 therefore as compared with a national system decentralized responsibility for income redistribution yields both less redistribution and less than the socially optimal amount of income redistribution the purpose of this paper is only to question step 1 of the above argument of course readers who accept the assumptions of the standard argument may conclude that the possible weakening of step 1 of that argument reduces the likelihood that its conclusion holds the paper argues that the cost of redistribution faced by state residents may in fact be lower at the state level than at the national level because their federal tax obligations fall as the state redistributes more income thus part of the cost of redistribution at the state level can be exported to residents of other states the state s federal tax bill falls when taxable incomes in the state are reduced by increased redistribution deductibility of state taxes enhances this result but is not necessary for it to demonstrate the proposition without adding unnecessary complication a simple model of income redistribution is described in which governments at all levels use linear tax transfer schedules to redistribute income the single government case is considered first then two levels of government are introduced and finally migration is allowed it is shown that without migration state costs are never greater than national costs of redistribution as long as redistribution reduces total money income when migration is allowed the result depends on the elasticity of migration responses compared with the elasticity of labor supply responses

fiscal decentralization in rentier regions evidence from russia summary the paper argues that governments in regions that rely heavily on intergovernmental transfers and natural resource rents face serious distortions in their incentive structure as a result such regions tend to have more fiscally centralized governments than the regional characteristics would suggest data on russian regions in the late 1990s early 2000s support this hypothesis advancing intraregional fiscal decentralization in rentier regions could reduce policy distortions and make the subnational environment more supportive of economic development

strategic interaction among governments in the provision of a global public good abstract how do governments respond to other governments when providing a global public good using data from 2007 to 2014 on medical research funding for infectious and parasitic diseases we examine how governments and foundations in 41 countries respond to funding changes by the us government which accounts for half of funding for these diseases because funding across governments might be positively correlated due to unobserved drivers they have in common we use variation in the representation of research intensive universities on us congressional appropriations committees as an instrument for us funding we find that a 10 increase in us government funding for a disease is associated with a 2 to 3 reduction in funding for that disease by another government in the following year

a model of welfare competition with evidence from afdc in this paper we test empirically for strategic behavior among the states using the cash support program aid to families with dependent children afdc to motivate the empirical work we adapt wildasin s model of income redistribution 1991 american economic review 81 757 773 to a model of interjurisdictional welfare competition although welfare competition may be generated from different frameworks we choose wildasin s model to illustrate how welfare benefit interdependence is genereated in the context of welfare migration we estimate a representative reaction function for afdc using both cross sections and pooled cross section data after controlling for other determinants of afdc benefit levels and for spatial error autocorrelation we find evidence showing competition 2000 academic press

geographical variations in expenditure of learning disability services in england this article investigates the determinants of local authority learning disability ld expenditure in england it adopts a reduced form of demand and supply model extended to account for possible interdependence between municipalities risk factors such as people aged under 14 mortality rate and lone parents seem to play an important role in explaining geographical variation of spending further labour municipalities on average allocate lower resources on ld than do other political parties finally results corroborate recent findings in economics that authorities interact with each other when allocating public resources

2 00 gas studying the effects of a gas tax moratorium there are surprisingly few estimates of the effects of sales taxes on retail prices especially at the firm level we consider the temporary suspension and subsequent reinstatement of the gasoline sales tax in illinois and indiana following a price spike in 2000 earlier laws set the timing of the reinstatements providing plausibly exogenous changes in the tax rates using a unique dataset of daily prices at the gas station level 70 of the tax suspension is passed on to consumers in the form of lower prices while 80 100 of the tax reinstatements are passed on to consumers some evidence suggests that these short run pass through estimates are smaller near the state borders with the tax reinstatements associated with relatively higher prices up to an hour s drive into neighboring states

how petty is petty corruption evidence from firm surveys in africa summary evidence suggests that corruption is costly for african firms this paper however shows that a minor difference in the way the question on bribe payments is asked has a large effect on estimates of the size of the burden on average firms report payments that are between 4 and 15 times higher when they report them as a percent of sales than when they report them in monetary terms the paper discusses several possible reasons for this but none explain the difference one plausible remaining reason is that firm managers overestimate bribes when they report them in percentage terms

market segmentation self selection and product line design the purpose of this paper is to develop a theory of market segmentation based on consumer self selection the extant theory is based on the third degree price discrimination model of pigou central assumptions of which are that the firm can directly address individual segments and isolate them by using consumer self selection i am relaxing these assumptions in the context of a monopolist designing a product line i show that this relaxation has significant implications for how the products and prices are chosen and what they look like in particular segments may be aggregated even though there are no economies of scale furthermore consumer self selection enables us to model cannibalization and competition among firms

local fiscal competition an application to sales taxation with multiple federations abstract local sales tax rates influence the location of retail activity this paper develops a theory and empirical identification strategy for studying sales tax competition with multiple federations as exemplified by multiple counties each containing several cities in addition to strategic interactions with nearby cities and a city s own county city tax rates are influenced by the tax rates of neighboring counties cities react heterogeneously to own county sales tax rates depending on distance to the county border using data on the driving time to county borders and a comprehensive cross section of local sales tax rates i exploit variation in proximity to county borders to identify vertical fiscal competition cities located near county borders react more intensely to their county s tax rate in comparison to towns at the interior an increase in the neighboring county tax rate raises city tax rates in nearby counties

effects of urban growth controls on intercity commuting this paper presents an empirical study of the effects of urban growth controls on the intercity commuting of workers growth controls land use regulations that attempt to restrict population growth and urban sprawl have increased housing prices and diverted population growth to uncontrolled cities it has been suggested that resulting changes in local labour supply might stimulate intercity commuting from uncontrolled to controlled cities to test this hypothesis a gravity model of commuting flows between places in california is estimated using alternative econometric methods ols heckman selection and count data the possibility of spatial dependence in commuting flows is also taken into consideration results suggest larger commuting flows to destination places that restrict residential growth

what drives corporate tax rates down a reassessment of globalization tax competition and dynamic adjustment to shocks we reassess the driving forces behind the recent decline of corporate tax rates in europe using data for up to 32 countries from 1983 to 2006 we analyze the roles of economic and financial openness as well as tax competition while allowing for dynamic adjustment to shocks and period specific and country specific effects while there is no evidence that countries that have become more open have reduced their tax rates more our findings suggest that countries strongly compete over statutory tax rates a simulation of tax rates in a scenario with no cross sectional dependence in tax setting suggests that in the absence of tax competition the mean statutory tax rate of western european countries in 2006 would have been about 12 5 percentage points above its actual level we conclude that the recent downward trend in corporate taxes is mainly a result of tax competition

mental health expenditure in england a spatial panel approach we empirically investigate the determinants of local authority mental health expenditure in england we adopt a reduced form demand and supply model extended to incorporate possible interaction among authorities as well as unobserved heterogeneity the model is estimated using an annual panel dataset that allows us to explore both time series and cross municipality variation in mental health expenditure results are consistent with some degree of interdependence between neighbouring municipalities in spending decisions this first attempt to apply spatial panels in investigating health expenditure offers insights and raises new questions

eight questions about corruption this paper will discuss eight frequently asked questions about public corruption 1 what is corruption 2 which countries are the most corrupt 3 what are the common characteristics of countries with high corruption 4 what is the magnitude of corruption 5 do higher wages for bureaucrats reduce corruption 6 can competition reduce corruption 7 why have there been so few recent successful attempts to fight corruption 8 does corruption adversely affect growth

technical note a pure birth model of optimal advertising with word of mouth a stochastic dynamic model of advertising which incorporates both advertising and word of mouth effects is formulated the time between the acquisition of new customers is assumed to be random the distribution of the time until the firm obtains a new customer depends upon the rate of advertising expenditures and upon a word of mouth parameter the problem of choosing the rate of advertising expenditures so as to maximize long run expected profit is formulated as a continuous time markov decision chain the impact of changes in various parameters of the model on optimal advertising decisions is studied

asymmetric tax competition abstract the paper analyzes nash equilibrium when two jurisdictions set tax rates on a tax base which is mobile between them population differences imply tax differences the smaller jurisdiction levies a lower tax rate in equilibrium and its residents are better off than those in the larger jurisdiction the nash equilibrium is inefficient if the two jurisdictions merged the resulting allocation would be efficient however if differences in population are great enough residents of the small jurisdiction would be made worse off by such a merger

the political trend in local government tax setting previous fiscal studies have paid little attention to the effects of social interaction on local tax setting this paper seeks to fill this gap by developing a theoretical model in which politicians belonging to the same party interact with each other in order to draw inferences about ideology this phenomenon produces a mimic effect which is called the political trend the results of the analysis show that the political trend gives rise to higher income tax rates and to tax mimicking at the local government level the framework developed also makes it possible to discriminate between leviathan type and welfarist type politicians the results show that the former are more sensitive than the latter to changes in the average income tax rate of their peers moreover leviathan type politicians are less sensitive than benevolent ones to changes in the central government s income tax rate

did the single market cause competition in excise taxes evidence from eu countries tax competition theory predicts that the introduction of the eu single market in 1993 should have caused excise tax competition and thus increased strategic interaction in the setting of excise taxes among eu countries we test this prediction using a panel data set of 12 eu countries over the period 1987 2004 we find that for excise duties on still and sparkling wine beer and ethyl alcohol strategic interaction significantly increased after 1993 there is weaker evidence of increased interaction in cigarette taxes possibly because cigarettes are widely smuggled giving rise to tax competition even before the single market

vertical tax competition in brazil empirical evidence for icms and ipi in the period 1995 2009 abstract the main objective of this study is to quantify the impact caused by changes in federal tax on the tax policy of the brazilian states considering the presence of horizontal tax competition between states using panel data covering 26 brazilian states plus the federal district during the period 1995 2009 two models were estimated representing the average reaction of the states in response to changes in federal tax rates in the first model both levels of government act simultaneously whereas in the second model reaction is sequential with the federal government acting as the leader in defining its effective tax rates the results indicate a positive and significant response of states to increases in the federal tax rate resulting in an over taxation of the common tax base and higher tax rates additional tests show that the first model is the most suitable to represent the problem analysed

the impact of competitive entry in a developing market upon dynamic pricing strategies this paper analyzes dynamic pricing strategies for new durable goods in a two period context the first period is characterized as a monopoly market structure for a new product having dynamic demand the second period begins when a new firm enters the market and thereby changes the market structure to a duopolistic one we begin by analyzing the pricing strategies of three types of monopolists nonmyopic myopic and surprised a nonmyopic monopolist is a first entrant who perfectly predicts the competitive entry a myopic monopolist totally discounts the duopolistic period and a surprised monopolist is a first entrant who has the longer time horizon of the nonmyopic monopolist but who does not foresee the competitive entry our results indicate that the nature of these pricing strategies may be quite different it is optimal for the nonmyopic firm to price its product at a higher level than the myopic monopolist additional results indicate under what circumstances the surprised monopolist will p

tax compliance and fiscal externalities evidence from u s diesel taxation abstract fiscal externalities across jurisdictions can arise from tax evasion and avoidance while the tax competition literature has generally focused on base shifting and the resulting positive fiscal externalities we show theoretically and empirically that negative fiscal externalities can dominate when the tax base is apportioned across jurisdictions this can lead to a negative relationship between jurisdiction size and the desired tax rate interstate truckers in the united states owe state diesel taxes based on diesel consumption which is apportioned based on the miles driven in each state we find that own state diesel sales fall when the diesel tax rates of other states rise suggesting that tax base evasion is the predominant source of externalities we then estimate a tax reaction specification finding that the own state tax rate is negatively correlated with the tax rates set in other states and with state size both consistent with the sign of the estimated fiscal externality

corruption and microenterprises in russia abstract in russia compliance with the rules and regulations that govern almost all aspects of economic life has created a hostile environment for microenterprises more serious than the regulations per se however is the potential niche they create for opportunistic behavior by regulatory authorities in russia the regulatory state has created a corrupt cadre of government bureaucrats who frequently engage in rent seeking behavior while enforcing regulations firms are not uniformly affected by corruption however this paper shows empirical evidence of differential incidence of extortion based on firm and entrepreneurial characteristics corruption in russia is similar to a regressive tax and acts as a disincentive to innovation and growth it may induce technologically inefficient production decisions and can dilute economies of scale and scope

pigou tiebout property taxation and the underprovision of local public goods abstract pigou s proposition that the use of distorting taxes rather than neutral head taxes reduces public service levels is examined in this paper a simple model with a national system of competing local governments is utilized to demonstrate that the use of a distorting property tax on mobile capital decreases the level of residential public services the case where public services are an intermediate producer good is also considered

economic regulations red tape and bureaucratic corruption in post communist economies summary should state regulatory involvement in the economy necessarily generate corruption while excessive regulatory burden is often treated as a cause of corruption this paper argues otherwise it distinguishes regulatory policy or de jure regulatory regimes from regulatory implementation and offers a more nuanced argument about the relationship between state regulations and bureaucratic corruption the analysis of business survey data covering 25 post communist economies demonstrates that mechanisms of regulatory implementation rather than heavy handed regulatory policy are responsible for bribery this analysis draws attention to the theoretical distinction between different types of regulatory hurdles and their differential effects on the quality of governance

optimal property taxation in the presence of interregional capital mobility abstract a single region s optimal property tax policy is examined in a model with interregional capital mobility in this model property taxation is used to finance local public expenditures different tax rates may be imposed on property used to produce goods which are traded between regions and property used to produce nontraded goods e g residential property the key determinants of the difference between the optimal tax rates are identified and it is argued that there exists a bias towards relatively low tax rates on property used to produce traded goods the role of labor mobility is also investigated

between anarchy and leviathan a note on the design of federal states abstract recent research suggests a rationale for the autonomy retained by federal states lower and intermediate level governments by encouraging interjurisdictional competition federal structures constrain the pursuit by public officials of private objectives inconsistent with the public weal but using federal structures to achieve this end has a cost the more decentralized a nation s public sector the more likely that some of the externalities generated by the provision of public goods and services will be ignored this note investigates the balance between the costs and benefits of decentralization that must be struck by a federal state s designers

gender and corruption in business abstractare firms with female owners or managers less corrupt than other firms we test this question using firm level data on corruption ownership and management we find that women in positions of influence are associated with less corruption female owners are associated with a lower incidence of bribery and report smaller levels of bribery moreover corruption is seen as less of an obstacle in companies where women are represented in top management by providing evidence that women are associated with lower levels of corruption in business our research contributes to the literature on development gender equality and corruption

misaligned incentives and the scale of incarceration in the united states abstract the incarceration rate has increased substantially in the united states between the 1980s and the 2000s in this paper i explore an institutional explanation for this growth the fact that costs of incarceration are not fully internalized typically prison is paid for at the state level but county employees such as judges prosecutors or probation officers determine time spent in custody i exploit a natural experiment that shifted the cost burden of juvenile incarceration from state to counties keeping overall costs and responsibilities unchanged this resulted in a stark drop in incarceration and no increase in arrests suggesting an over use of prison when costs are not internalized the large magnitude of the change suggests that misaligned incentives in criminal justice may be a significant contributor to the current levels of incarceration in the united states

spatial competition with changing market institutions summary competition across space can be fundamentally altered by changes in market institutions we propose a framework that integrates market altering policy changes in the spatial analysis of competitive behavior and incorporates endogenous breaks in explanatory variables for spatial panel datasets this paper fills a gap in the literature between work focusing on spatial price responsiveness of agents and work on changes in market regulations that affect competition we apply the framework to an important current fishery management policy to explore how a change from aggregate to individual fishing quotas affects the spatial price responsiveness of fish processors copyright 2012 john wiley sons ltd

migration the life cycle and state benefits how low is the bottom i show that among women likely to use welfare movers move to higher benefit states i also find that the probability likely welfare users will move at all is lower in higher benefit states this effect is concentrated early in the life cycle as theory predicts i construct a theoretical framework to measure the impact of welfare migration on optimal state benefits simulation results suggest little impact in higher benefit states but possibly a more substantial impact in other states finally evidence suggests little reason for concern due to welfare migration in using cross state variation in welfare generosity to identify incentive effects of the welfare system on other outcome variables

the effects of politics on local tax setting evidence from france this paper investigates the hypothesis that local politics has an impact on local taxation in the french public sector by using a cross sectional dataset on departments in 1999 political variables are included in a tax setting equation to provide empirical evidence whether local governments in france adopt business taxation behaviour closer to the leviathan government hypothesis with higher tax rates when political competition decreases or to the partisan government hypothesis with differences in tax rates according to partisan variables it is shown that the wider the seat s margin the lower the tax rates and that this cut is weaker in the case of a left wing local majority than a right wing majority it is therefore concluded that the partisan government hypothesis is more supported by the french data than the leviathan one even after controlling for tax interdependencies between departments

interactions in local governments spending decisions evidence from portugal costa h goncalves veiga l and portela m interactions in local governments spending decisions evidence from portugal regional studies this paper aims to analyse the degree of interaction between portuguese municipalities expenditure levels by estimating a dynamic panel model based on jurisdictional reaction functions the analysis is performed for all 278 portuguese mainland municipalities from 1986 to 2006 using alternative ways to measure neighbourhood results indicate that local governments spending decisions are significantly and positively influenced by the actions of neighbouring municipalities attempts to identify the sources of interaction allow it to be concluded that they are due to spillovers that require coordination in expenditure items and to mimicking behaviour possibly to attract households and firms

how a race to the bottom can make you fat abstractthis article measures the effect of fiscal competition on obesity rates in the united states through education and health spending we hypothesize that fiscal competition to attract firms r

bohn s test of fiscal sustainability of the american state governments the dramatic fall in state revenues during the great recession and the resultant large budget deficits accentuated concerns about state fiscal sustainability i employ a model based approach proposed by bohn 1998 to test for sustainability in this approach a positive and significant reaction of the ratio of primary surplus ratio s to lagged debt constitutes a sufficient condition for sustainability based on a panel of 48 contiguous states 1961 2008 and several model specifications i find robust evidence in favor of sustainability further analysis suggests that the adjustment of the components of s to debt is asymmetric with the revenue side bearing a heavier burden than the spending side the response of s is also found to be asymmetric with respect to the level of debt finally the magnitude of the response is larger in states with a higher degree of fiscal stringency in general and own revenue and no deficit carryover provisions in particular

an optimal taxation approach to fiscal federalism in a federal system of government each unit of government decides independently how much of each type of public good to provide and what types of taxes and which tax rates to use in funding the public goods in this paper we explore what types of problems can arise from this decentralized form of decision making in particular we describe systematically the types of externalities that one unit of government can create for nonresidents through both its public goods decisions and its taxation decisions the paper also explores briefly what the central government might do to lessen the costs of decentralized decision making

interest groups and the size of government the results of the previous section estimates of a three equation model from 23 observations must obviously be regarded as tentative the consistent positive relationship between number of interest groups and size of government observed with changing sets of included independent variables changing samples of nations and treating the number of interest groups as either exogenous or codetermined does imply rather unequivocally that interest groups are able to influence public policies in such a manner as to lead to increased government size beyond helping to reinforce this conclusion the results of the previous section should be regarded as first steps in the development of a model of the polity that can explain participation in the political process by interest groups and citizens as well as the size of government

spatial competition and the price of college i introduction over the last half century the u s higher educational system has been transformed from a collection of local independent college fiefdoms into a regionally and nationally integrated market in which universities compete for both resources and students as in hoxby 1997a concurrently duffy and goldberg 1998 contend that the most salient feature of the u s higher education market has been tuition increases that exceed both the rate of inflation and income growth combined with financial aid packages that increasingly emphasize merit over need the rising real cost of college in the midst of growing competition has become a source of considerable angst for parents university administrators and public policy analysts who are concerned that need blind admission goals are being sacrificed in favor of strategic enrollment management policies designed to attract the best and the brightest thus mcpherson and shapiro 1998 have asked if the rapidly rising cost of college begs the question of whether universities compete on price as opposed to some other metric such as reputation or resources this article is the first to empirically examine price setting practices among universities by questioning whether list tuitions i e the posted price or net tuitions i e the posted price minus financial aid of private universities respond to the geographic and qualitative proximity of competitors there are theoretical reasons to expect that the increasing integration of the higher education sector might affect tuitions particularly for selective private universities that are relatively unfettered by outside pricing constraints as discussed in bowen 1967 for example hoxby 1997b models integration as the opening of trade among autarkic colleges of varying quality trade is found to reduce the monopsony power of universities over local consumers and intensify their competition for high quality students who because they are both inputs into and consumers of a college education can improve institutional quality thus despite applicant pools well in excess of the number of enrollment slots ehrenberg 2000 has documented that most selective and well endowed institutions increasingly spend significant sums recruiting top applicants and use a combination of enrollment management tools such as merit aid early decision policies and campus amenities to lure top applicants to enroll the advent of individual college rankings further raised the enrollment management stakes by providing an easily observed quality metric as this measure has been found in monks and ehrenberg 1999 to influence a student s college choice one may anticipate that select institutions may have been afforded an ability to ramp up their list tuitions using their substantial endowments and the tuition revenue collected from the most financially able students to price discriminate in favor of needy academically able students as discussed in cook and frank 1993 ehrenberg and rizzo 2004 and hill winston and boyd 2004 nonetheless heller 2004 notes that the collective impact of such enrollment management practices in higher education as a whole is of particular policy concern because empirical evidence suggests needy students increasingly rely on non need based aid often in the form of loans to finance their college educations on the other hand a number of studies including those of allen and shen 1999 moore et al 1991 and parker and summers 1993 have documented that less selective private institutions also appear to be cognizant that their more selective competitors have greater resources and deeper applicant pools which yield greater demand elasticities for these institutions moreover as discussed in kane and orszag 2003 and rizzo 2004 less selective private institutions must increasingly ward off the potential flight of students to lower cost public institutions that have also been forced to manage enrollments in response to declining state government support

chapter 17 marketing strategy models publisher summary despite the advances in the sophistication and proliferation of marketing science models relatively few true marketing strategy models have been developed and those that have been developed generally had limited impact on management the gap between management needs for models that help them generate evaluate and implement better marketing strategies and the available models especially non traditional is narrowing as the environment and the characteristics of successful businesses are changing the nature of the marketing paradigm and the nature of desired marketing strategy models is changing as well

a tiebout tax competition model abstract this paper analyzes a tiebout tax competition model where heterogeneity of consumer preferences is introduced into a standard tax competition framework following the modern tiebout tradition consumer sorting in the model is achieved through the activities of profit maximizing community developers once sorting is achieved the equilibrium is equivalent to that in a standard tax competition model with immobile but heterogeneous consumers a principal lesson of the analysis is that under capital taxation consumers with high public good demands are worse off than under a head tax regime in pursuit of high levels of public spending high demand communities impose high tax rates which drive away capital the analysis also establishes a number of other results

labor and capital income taxation fiscal competition and the distribution of wealth this paper studies optimum income taxation in a small open economy where households differ with respect to their endowments with wealth the government raises taxes on income from labor and wealth and a source tax on capital used in domestic production to avoid taxes households may at some cost shift capital to labor income and vice versa the government can only observe income after shifting has taken place it turns out that the optimal source tax on capital is negative the optimal income tax is characterized by a positive marginal tax rate for the wealthy households which is equal for labor income and income from wealth for the poor households the marginal tax rate on capital income is higher than that on labor income we also study international tax coordination and show that a reduction in the source subsidy on capital raises welfare

international aspects of public infrastructure investment m odelling infrastructure as an international public good in a two country m odel of trade where each country s social planner behaves strategically we show that the equilibrium levels of infrastructure are sub optimal from a global perspective utilising an appropriate econom etric fram ework and data from 16 european countries over the period 1987 95 we find evidence that accords well with the m ain predictions of our theory thus we are able to offer a plausible theoretical explanation why public capital m ay be undersupplied as suggested by previous em pirical literature