state fiscal institutions and empty nest migration are tiebout voters hobbled abstract using the health and retirement study and a national panel of local fiscal data we test a lifecycle model of tiebout sorting on average cross state empty nest movers presumed to be out of fiscal equilibrium experience large fiscal gains in the form of reduced exposure to local school spending and property taxes while local empty nest movers experience no fiscal adjustment we find evidence that within state fiscal adjustment is constrained by state institutions that limit local discretion empty nest households moving within states with school finance equalization do not engage in tiebout consistent fiscal adjustment while those moving within states lacking school finance equalization adjust substantially

outsourcing in us cities ambulances and elderly voters this paper develops a public choice model of city service provision and uses empirical analysis to pin down some of the model s key assumptions many of the largest cities in the united states outsource emergency medical services and analysis of data from the 200 largest us cities finds that a number of variables are significant determinants of emergency ambulance outsourcing including the fraction of a city s voters over the age of 65 this finding provides evidence that elderly voters are important in policy determination and suggests a particular shape for the model s contracting cost curve

e ztax tax salience and tax rates this paper examines whether the salience of a tax system affects equilibrium tax rates i analyze how tolls change after toll facilities adopt electronic toll collection etc drivers are substantially less aware of tolls paid electronically i estimate that in steady state tolls are 20 to 40 percent higher than they would have been without etc consistent with a salience based explanation for this toll increase i find that under etc driving becomes less elastic with respect to the toll and toll setting becomes less sensitive to the electoral calendar alternative explanations appear unlikely to be able to explain the findings

buying their votes a study of local tax price discrimination i introduction financial support for public schools in developed countries has recently been declining as governments face increasing pressure to balance their budgets by reducing expenditures on public services public school revenues may be particularly vulnerable in countries where elderly residents will compose a rising share of the population while the percent of united states residents over the age of 65 was 12 4 in 2000 the u s census bureau 2008 predicts this will rise to 16 3 by 2020 and 20 7 by 2050 recent growth in the upper middle aged population ages 55 64 has occurred throughout the united states and if current trends continue communities with the largest growth in the elderly share ages 65 and over over the next 30 years will experience this growth primarily due to aging in place rather than residential migration frey 2007 the typical school district will thus have an increasing share of adults who do not consume public schooling services this trend could have two important implications for school districts 1 decreased political support for school expenditures and 2 a greater tax base per student due to a reduction in the relative size of the school aged population if the former effect dominates the latter then local district revenues per student will decline this dynamic would be consistent with prior u s trends figlio and fletcher 2012 find that most of the within metropolitan area variation in suburbs age distributions in 1980 and 1990 can be traced back to these suburbs age distributions when adults settled there in earlier decades those authors simulate the shares of elderly adults residing in various suburbs based on the aging in place of early residents and their simulated elderly shares are negatively correlated with suburban school expenditures state or federal governments could potentially alter this dynamic by subsidizing local property tax reductions that are targeted toward elderly homeowners elderly homeowners receiving these reductions might support higher levels of local public school spending because they can maintain high property values at a relatively low cost in other words elderly homeowners preferred level of local tax revenues may be sensitive to their marginal local tax price the change in their tax payments required to increase local school district revenues by one dollar by influencing elderly homeowners preferred local tax rates targeted tax price reductions may shift the identity of the local median voter and thus moderate how changes in demographics affect local public revenue this article is the first to empirically examine whether targeted tax price reductions moderate the impact of age demographics on local government revenues prior studies examined how the aging in place of local populations affects public school revenues figlio and fletcher 2012 harris evans and schwab 2001 ladd and murray 2001 and this article tests whether there is important within sample heterogeneity in these effects using similar methods as these prior studies the empirical models below isolate the exogenous component of changes in local age demographics by using lagged population shares as instrumental variables predicting future age demographics to test for heterogeneous effects i assembled a longitudinal data set concerning states property tax reduction policies for elderly homeowners the results confirm earlier studies findings that exogenous increases in the fraction of elderly residents ages 65 and over on average decrease tax revenues in u s school districts however state financed reductions in elderly homeowners marginal local tax prices significantly reduce the negative effect of the local elderly population share this negative effect is only large in communities not offering any targeted local tax price reductions to elderly homeowners significant differences in the effects of the elderly share across state policy regimes are robust to several alternative empirical specifications including comparisons of school districts that are located near each other on opposite sides of state borders

do pensions foster education an empirical perspective the paper examines the effect of population ageing on public education spending on the one hand ageing is expected to have a negative effect on education as an increasing number of retirees resu

taxation and housing old questions new answers this paper sketches how the tax reforms of the 1980s affected the incentives and distortions associated with tax policy toward housing markets there are three principal conclusions 1 reductions in marginal tax rates particularly for high income households reduced the tax induced distortion in the user cost of owner occupied housing this lowered the deadweight losses associated with the favorable tax treatment of homeownership 2 the increase in the standard deduction in the tax reform act of 1986 tra86 removed several million middle income homeowners who previously itemized from the ranks of itemizers for these households tra86 raised the marginal cost of owner occupied housing these changes also exacerbated the regressive nature of the mortgage interest subsidy in 1988 more than half of the tax losses associated with mortgage interest deductions accrued to the 8 of taxpayers with the highest economic incomes 3 tra86 reduced incentives for rental housing investment contributing to the decline in new multifamily housing starts from 500 000 per year in 1985 to less than 150 000 in 1991 in the long run these policies will lead to higher rents this abstract was borrowed from another version of this item

does public insurance crowd out private insurance the cost of expanding public sector health programs depends critically on the extent to which public eligibility will cover just the uninsured or will crowd out existing private insurance coverage we estimate the extent of crowd out arising from the expansions of medicaid to pregnant women and children over the 1987 1992 period we estimate that approximately 50 percent of the increase in medicaid coverage was associated with a reduction in private insurance coverage this occurred largely because employees took up employer based insurance less frequently there is also some evidence that employers contributed less for insurance and that workers dropped coverage of dependents

specific or ad valorem tax for an exhaustible resource abstract not withstanding the equivalence in static framework between an ad valorem and a specific sale tax this paper shows in the dynamic hotelling model for an exhaustible resource that the ad valorem tax is definitely welfare superior to the specific tax

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

the impact of macroeconomic variables demographic structure and compulsory superannuation on share prices the case of australia this paper investigates the impact of the population in the 40 64 age band on share prices using an annual time series data set for the period 1965 2002 and the impact of the superannuation fund on share prices using quarterly time series data for the period 1988 q1 to 2002 q4 in accordance with poterba s suggestion we have also used real gdp interest rates and inflation as control variables in both models using cointegration and the error correction mechanism we found that the specified models are robust the variables under study for both models are cointegrated and long run relationships exist between the variables we also found that the population in the 40 64 age band and the superannuation fund positively and significantly affect share prices separately in the long run

capitalization and the theory of local public finance the tiebout literature is incomplete this paper argues because it has not fully accounted for the capitalization of local fiscal variables into house values the paper explains why capitalization arises why it persists in long run equilibrium how it affects both residential location and the outcome of local voting and why it interferes with the efficiency of a system of local governments the analysis which is based on the main tiebout assumptions plus a property tax combines a model of household bids in a housing market with a median voter model of local public service determination

a new approach for identifying the parameters of a tax capitalization model abstract this study re estimates property tax capitalization rates with two empirical innovations first the underidentification problem inherent in all capitalization studies is resolved using estimates of rental values instead of estimates of the net user cost second the methodology along with the utilization of a unique data set mitigates biases resulting from potential correlations between property tax rates and unobservable amenities or public services the extent of tax capitalization estimated here is greater than estimates reported in many recent studies and is statistically indistinguishable from full capitalization the study also provides insights regarding the variability of the net user cost of housing

measuring uncertainty based on rounding new method and application to inflation expectations abstract the literature on cognition and communication documents that people use round numbers to convey uncertainty this paper introduces a method of quantifying the uncertainty associated with round responses in pre existing survey data i construct micro level and time series measures of inflation uncertainty since 1978 inflation uncertainty is countercyclical and correlated with inflation disagreement volatility and the economic policy uncertainty index inflation uncertainty is lowest among high income consumers college graduates males and stock market investors more uncertain consumers are more reluctant to spend on durables cars and homes round responses are common on many surveys suggesting numerous applications of this method

electoral competition and local government responsiveness in brazil summary the empirical literature on the effects of competition on the supply of public goods shows controversial results at the local level the main objective of this paper is to investigate this relationship in a federalist country brazil where the political system places few barriers to the entry of competitors and local governments have the independence to establish their own public policy we show that a higher effective number of candidates running for the executive branch increase the supply of local public goods the number of student enrollments teachers and free immunizations

another perspective on the effects of inflation uncertainty this paper examines the effects of inflation uncertainty on real economic activity by utilizing a flexible dynamic multivariate framework that accommodates possible interaction between the conditional means and variances the empirical model is based on a familiar identified vector autoregressive framework modified to accommodate multivariate generalized autoregressive conditional heteroskedasticity our empirical model is preferred to the baseline var by likelihood based information criteria and it retains the important dynamics of the underlying var we find that an average shock to inflation uncertainty has tended to reduce output growth over three months by about 22 basis points

the taxation of exhaustible resources the efficiency and equity effects of unit yield property and windfall profits taxes upon nonrenewable resources are compared the yield tax is the most efficient and unit and property taxes are the least efficient of current taxes if the base price of the windfall profits tax is set close to extraction cost the windfall profits tax can be even more efficient than the yield tax all the tax burdens fall primarily upon owners in fact with the property and windfall profits taxes consumers can even be made better off 4 references 7 tables

housing wealth property taxes and labor supply among the elderly we investigate the relationship between housing wealth property taxes and elderly labor supply using longitudinal data from the health and retirement survey spanning the recent boom bust housing cycle when combined with msa specific house price indexes the data provide plausibly exogenous variation in housing wealth identified through within msa renter homeowner comparisons our findings suggest that elderly households respond to variation in housing wealth and property taxes in the predicted opposing directions that wealth influences labor supply to a lesser extent than factors like health and marital status and that the effect of housing wealth on labor supply varies by gender and age

demographic change intergenerational linkages and public education in this brief paper i explore several issues related to u s demographic change and the political economy of public education i describe the existing empirical evidence that suggests that older and childless voters are less likely to support public school spending than younger voters with children i then note several unresolved issues about the degree to which rational self interest should lead older voters to vote for low levels of public school spending excerpt

on the investment uncertainty relationship in a real options model abstract it appears to be widely accepted in the real options literature that an increase in uncertainty should have an inhibiting effect on investment our article demonstrates that the notion of a negative uncertainty investment relationship is not always correct we show that in certain situations an increase in uncertainty can actually increase the probability of investing and thereby have a positive impact on investment

education spending in an aging america abstract in this paper we use a national panel of public school districts to study the impact of an aging population on public education spending in contrast to previous analyses that use state level data we find that the elderly have only a modest overall negative effect on education spending at the district level our results confirm however that a growing share of elderly at the state level tends to depress state spending on education these results are consistent with the hypothesis that the elderly believe only higher local spending is capitalized into house values

health insurance eligibility utilization of medical care and child health two economists applied data from the current population survey and the national health interview survey and state level data on child mortality to a simulation model of utilization of medical care that varies only with the states legislative environment to examine the utilization of medical care and health effects of medicaid eligibility on low income children the models took into consideration the recent expansions of medicaid to low income children 38 of those ineligible for medicaid in 1984 who became eligible due to changes during 1984 1992 were uninsured between 1984 and 1992 expansions of the medicaid program increased the proportion of children eligible for medicaid almost two fold 16 1 vs 31 2 yet coverage rates were always lower than eligibility rates 13 2 vs 16 1 in 1984 and 20 3 vs 31 2 in 1992 and the increase in coverage rates was only about 50 of the increase in eligibility rates during 1984 1992 the probability that a child was eligible for medicaid increased the probability of health insurance coverage by 29 77 when the model considered bias in variables e g a recession in a state the take up rate was only 22 73 nevertheless medicaid markedly increased use of medical care for example eligibility for medicaid increased the likelihood of making a visit to a physicians office in the last two weeks by about 50 it also increased the probability of a child visiting the hospital suggesting inefficiency in the way that providers deliver care to medicaid enrollees medicaid eligibility had a significant effect on reducing child mortality the 15 1 percentage point increase in eligibility during 1984 1992 reduced child mortality by 4 5 when the researchers examined parent assessed subjective health measures medicaid eligibility had no effect on child health medicaid eligibility reduced race and education based disparities in the number of visits and racial differences in mortality yet it may actually intensify current disparities in health care delivery site

intergenerational conflict and the political economy of school spending abstract in this paper we use survey data to examine support among voters from different age cohorts for public school spending the survey asked potential voters in california how they intended to vote on two initiatives one a statewide initiative that would increase spending on public schools throughout the state and the other a local initiative that would increase spending only in the respondent s local school district we find that support for school spending generally declines with age but that older voters are more willing to support local spending on schools than state spending we examine two explanations for this voting pattern the capitalization of local spending into housing values and intergenerational altruism our results do not strongly favor one explanation over the other suggesting that both factors probably play important roles in sustaining support among older voters for local school spending

grey power and the economy aging and inflation across advanced economies what explains the cross national variation in inflation rates across countries in contrast to most literature which emphasizes the role of ideas and institutions this article focuses on electoral politics and argues that aging leads to lower inflation rates countries with a larger share of elderly exhibit lower inflation because older people are both more inflation averse and politically powerful forcing parties seeking their votes to pursue lower inflation logistic regression analysis of survey data confirms that older people are more inflation averse and more likely to punish incumbents at the ballot box for inflation panel data regression analysis shows that social democratic parties have more economically orthodox manifestos in european countries with more elderly people and that the share of elderly is negatively correlated with inflation in both a sample of 21 advanced economies and a larger sample of 175 countries aging therefore pushes governments to pursue lower inflation

flexible parametric estimation of duration and competing risk models in this paper we specify and estimate a flexible parametric proportional hazards model the model specification is flexibly parametric in the sense that the baseline hazard is non parametric while the effect of the covariates takes a particular functional form we also add parametric heterogeneity to the underlying hazard model specification we specify a flexible parametric proportional competing risks model which permits unrestricted correlation among the risks unemployment duration data are then analysed using the flexible parametric duration and competing risks specifications we find an important effect arising from the exhaustion of unemployment insurance and significantly different hazards for the two types of risks new jobs and recalls

pensions and household wealth accumulation abstract economists have long suggested that higher private pension benefits crowd out other sources of household wealth accumulation we exploit detailed information on pensions and lifetime earnings for older workers in the 1992 wave of the health and retirement study and employ an instrumental variable iv identification strategy to estimate crowd out the iv estimates suggest statistically significant crowd out each dollar of pension wealth is associated with a 53 67 cent decline in nonpension wealth with less precision we use an instrumental variable quantile regression estimator and find that most of the effect is concentrated in the upper quantiles of the wealth distribution

you can take it with you proposition 13 tax benefits residential mobility and willingness to pay for housing amenities abstract the endogeneity of prices has long been recognized as the main identification problem in the estimation of marginal willingness to pay mwtp for the characteristics of a given product this issue is particularly important in the housing market since a number of housing and neighborhood features are unobserved by the econometrician this paper proposes the use of a well defined type of transaction costs moving costs generated by property tax laws to deal with this type of omitted variable bias california s proposition 13 property tax law is the source of variation in transaction costs used in the empirical analysis beyond its fiscal consequences proposition 13 created a lock in effect on housing choice because of the implicit tax break enjoyed by homeowners living in the same house for a long time its importance to homeowners is estimated from a natural experiment created by two amendments that allow households headed by an individual over the age of 55 to transfer the implicit tax benefit to a new home indeed 55 year old homeowners have 25 higher moving rates than those of comparable 54 year olds these transaction costs from the property tax laws are then incorporated into a household sorting model the key insight is that because of the property tax laws different potential buyers may have different user costs for the same house the exogenous property tax component of this user cost is then used as an instrumental variable i find that mwtp estimates for housing characteristics are approximately 100 upward biased when the choice model does not account for the price endogeneity

efficiency inducing taxation for a monopolistically supplied depletable resource author s bergstrom ted cross john porter dick abstract we show that for a depletable resource if the competitive time path of prices is known and if the profit function is concave then there is an easily described time path of taxes and or subsidies that would induce a monopolist to follow an efficient time path of extraction

legal constraints and the choice of educational grant structures recent empirical work suggests that legalconstraints are significant in choosingstate educational grant structures unfortunately the literature has not takensuch constraints into account thus callinginto question particular grant structurerecommendations this paper studies theconditions under which a legislature underorder to reform its educational grantstructure prefers foundation grants overdistrict power equalization grants atheoretical model is presented in which thechoice is shown to depend on the legalbasis of the court s decision and theempirical validity of this conclusion isdemonstrated using connecticut data and aseparate model of school districtexpenditure choice

honey i shrunk the kids benefits revisiting intergenerational conflict in oecd countries intergenerational conflict may arise when the interests of different age groups do not align we examine cross country data to find evidence for this conflict in oecd countries we derive our results from a fgls estimation model which is complemented by a system gmm estimation to account for potential endogeneity the data are from a panel of 22 oecd countries over the time period 1985 2005 we find little support for intergenerational conflict in general however those who are close to statutory retirement age dislike public expenditure on families and education because once they retire they will have less income compared to their work income this effect is transitory however implying a change in voting behavior during retirement age

ethnic diversity public spending and individual support for the welfare state a review of the empirical literature we review the empirical literature that studies the effect of ethnic diversity on public spending and on individual support for the welfare state the survey puts a particular focus on the fast growing literature that uses experiments to study the effects of ethnic diversity many of these studies have appeared since the pioneering survey by alesina and la ferrara and have not been covered by a survey before

the nonexcludable publicness of primary and secondary public education abstract existing theoretical models of education as with most practical applications of public good theory suggest some form of joint public private financing empirical work has only rarely addressed these theoretical considerations employing individual level observations we model and estimate the private and social demands for public education in a community an ordered probit model with known thresholds is used to obtain unique parameter estimates the individual private and social demands are then employed to construct a measure of the publicness of education at various quantities

property tax capitalization in a model with tax deferred assets standard deductions and the taxation of nominal interest previous property tax capitalization studies assume that families itemize that they save in taxable assets and that real interest income is taxed however many families do not itemize many families invest in tax deferred assets and nominal interest income is taxed as a consequence prior studies likely misspecify the property tax capitalization equation for roughly ninety percent of their samples taking federal tax provisions into account increases the precision of our estimated capitalization rate in addition our results suggest that biases in prior studies likely contribute to the variety of capitalization estimates in the literature

property taxes and elderly mobility abstract the 2000 2005 housing market boom in the u s has caused sharp increases in residential property taxes housing rich but income poor elderly homeowners often complain about rising tax burdens and anecdotal evidence suggests that some move to reduce their tax burden there has been little systematic analysis however of the link between property tax levels and the mobility rate of elderly homeowners this paper investigates this link using household level panel data from the health and retirement study hrs and a newly collected data set on state provided property tax relief programs these relief programs generate variation in effective property tax burdens that is not due solely to arguably endogenous local community choices about taxes and expenditure programs the findings provide evidence suggesting that higher property taxes raise mobility among elderly homeowners the point estimates from instrumental variable estimation using relief programs to generate instruments suggest that a 100 increase in annual property taxes is associated with a 0 73 percentage point increase in the 2 year mobility rate for homeowners over the age of 50 this is an 8 percent increase from the baseline 2 year mobility rate of 9 percent these results are robust to alternative specifications

local governments in kind transfers and economic inequality abstract we examine how in kind transfers provided by local governments affect economic inequality the allocation of in kind transfers to households and the adjustment for differences in needs are derived from a model of local government spending behavior the model distinguishes between fixed and variable costs in production as well as mandatory programmatic spending components versus discretionary spending on different service sectors and target groups to estimate the model we combine norwegian data from municipal accounts and administrative registers for the period 1982 2013 we find that economic inequality is considerably lower when taking in kind transfers into account while the poor benefit from receiving a relatively large share of public services the equalizing effect of in kind transfers tends to be smaller than the equalizing contribution from public cash transfers when examining the time trends in inequality we find that local governments attenuated the growth in cash income inequality by re allocating in kind transfers to low income families this reduction in inequality is mostly due to changes in spending priorities across service sectors and target groups while the contribution from re allocation of resources across municipalities is much smaller

aging population and education finance abstract conventional wisdom suggests that aging of population will increase political pressure to tilt the composition of social spending in favor of the elderly while potentially sacrificing other publicly provided goods such as education this view seems to be supported by recent empirical findings that per child public education spending tends to be lower in us jurisdictions with higher fraction of elderly residents do these cross sectional findings also carry the dynamic implication that longevity will lead over time to waning political support for funding of public education this paper challenges such implication we present a model that is consistent with the aforementioned cross sectional regressions yet predicts an overall positive impact of increasing longevity on public education funding and economic growth

nominal loss aversion housing equity constraints and household mobility evidence from the united states abstract this paper exploits the recent variation in us house prices to examine the effect of equity constraints and nominal loss aversion on household mobility detailed data from the 1985 1996 national longitudinal survey of youth nlsy79 were matched with house price data from 149 metropolitan areas to estimate instrumental variables linear probability and semi parametric proportional hazard models of intra metropolitan mobility household mobility is significantly influenced by nominal loss aversion there is little evidence that low equity because of fallen house prices constrains mobility

natural resources a curse on education spending abstract in line with the rising interest in harnessing natural resource revenues for economic and human development through productive government investments this paper aims to address an important blind spot in our understanding of the resource curse by contributing innovative insights on how natural resource wealth impacts government priorities and expenditure practices using a large panel dataset of 140 countries covering the period from 1995 to 2009 we find an adverse effect of resource dependence on public education expenditures relative to gdp that is robust to controlling for a range of additional covariates furthermore our findings indicate that this resource curse effect on the government prioritization of education mainly stems from point source natural resources these results are of particular importance for the sustainable management of natural resource wealth in developing countries as they could achieve especially high returns by investing resource revenues in public goods such as education while this paper underlines the importance of institutions and government accountability our findings also raise questions on the role of the private sector as a partner in development as the extractives industry could consider increasing funding for education through corporate social responsibility csr initiatives

do the elderly vote with their feet this research explores whether the elderly vote with their feet by migrating to states with government policies that treat them favorably a theoretical model is presented that clarifies the effects of cost of living amenities and the public sector on migration decisions and that informs our empirical analysis using state level migration data from the 1990 census we estimate out migration and in migration equations that suggest that the public sector is an important determinant of elderly migration but in sometimes unexpected ways our results lend some support for the tiebout hypothesis but they also raise serious questions about the nature of the elderly s preferences for government policy

housing price functions and ownership capitalization rates abstract in this paper we examine the problem of consistently estimating capitalization rates and hedonic housing prices we specify a hedonic pricing model for housing that combines owner occupied and rental unit samples in a manner yielding hedonic prices not subject to selection bias and capitalization rates which vary with the age and family income of the residents we use the 1982 annual housing survey ahs for metropolitan philadelphia to obtain parameter estimates for this model our findings indicate that selectivity bias is present in price functions utilizing only owner occupied or rental unit samples our results further indicate that the mean annual capitalization rate for owner occupied units is approximately 10 however the capitalization rate is non monotonically related to both age of the head and family income