consistent voting rules for competitive local public goods economies abstract we establish the existence of a voting market equilibrium for a large class of local public goods economies where faced with prices of the private goods and with the public goods produced by the local governments each firm maximizes its profits and each individual maximizes his utility subject to his budget constraint in addition each local government taking the prices of private goods as given i has a balanced budget and ii chooses its production of public goods in such a way that no group that contains more than q q 1 of its residents where q denotes the number of public goods produced will unanimously prefer another affordable vector of public goods

the segregative properties of endogenous jurisdiction formation with a land market this paper examines the segregative properties of tiebout like endogenous processes of jurisdiction formation in presence of a competitive land market in the model considered a continuum of households with different wealth levels and the same preferences for local public goods private spending and housing choose a location from a finite set each location has an initial endowment of housing that is priced competively and that belongs to absentee landlords each jurisdiction is also endowed with a specific technology for producing public goods households preferences are assumed to be homothetically separable between local public goods on the one hand and private spending and housing on the other public goods provision is financed by a given but unspecified mixture of linear wealth and housing taxes we show that stable jurisdiction structures are always segregated by wealth only if households view any public good conditionally on the quantities of the other public goods as either always a gross substitute or either always a gross complement to private spending we also show that if there are more than one public good this condition is not sufficient for segregation unless households preferences are additively separable since this condition is necessary and sufficient for the segregation of stable jurisdiction structures without land market and with only one public good our results suggests that introducing a land market does not affect the segregative properties of endogenous jurisdiction formation but that increasing the number of public goods mitigates segregation

inefficiencies from metropolitan political and fiscal decentralization failures of tiebout competition we examine the welfare effects of provision of local public goods in an empirically relevant setting using a multi community model with mobile and heterogeneous households and with flexible housing supplies we characterize the first best allocation and show efficiency can be implemented with decentralization using head taxes we calibrate the model and compare welfare in property tax equilibria both decentralized and centralized to the efficient allocation inefficiencies with decentralization and property taxation are large dissipating most if not all the potential welfare gains that efficient decentralization could achieve in property tax equilibrium centralization is frequently more efficient an externality in community choice underlies the failure to achieve efficiency with decentralization and property taxes poorer households crowd richer communities and free ride by consuming relatively little housing thereby avoiding taxes copyright oxford university press

finance and business cycles the credit driven household demand channel what is the role of the financial sector in explaining business cycles this question is as old as the field of macroeconomics and an extensive body of research conducted since the global financial crisis of 2008 has offered new answers the specific idea put forward in this article is that expansions in credit supply operating primarily through household demand have been an important driver of business cycles we call this the credit driven household demand channel while this channel helps explain the recent global recession it also describes economic cycles in many countries over the past 40 years

the estimation of demand parameters in hedonic price models this paper shows that the econometric problem of estimating hedonic demand parameters is not a standard identification problem caused by demand supply interaction as has been often assumed estimation procedures based on this assumption lead to biased results the hedonic estimation problem is instead caused by the endogeneity of both prices and quantities when households face a nonlinear budget constraint an instrumental variables solution to this problem is suggested using instruments that exogenously shift the budget constraint

transmission of risk preferences from mothers to daughters we study the transmission of risk attitudes in a unique survey of mothers and children in which both participated in an incentivized risk preference elicitation task we document that risk preferences are correlated between mothers and children when the children are just 7 8 years old this correlation is only present for daughters we further show that a measure of maternal involvement is a strong moderator of the association between mothers and daughters risk tolerance this is consistent with a role for socialization and parental investment in the intergenerational transmission of risk preferences

some comments on majority rule equilibria in local public good economies abstract this paper examines some of the main assumptions and results of the literature on majority rule equilibrium in local public good economies it is shown that the usual assumption that the ordering of agents mrss between the private and public good is a continuous monotone function of income and independent of the other economic variables is not necessary for an mre to exist in addition it is shown that in economies with home ownership stratification of agents by income or preferences need not occur in equilibrium

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

are there cultural effects on saving some cross sectional evidence why are there such large differences in saving rates across countries conventional economic analyses have not been successful in explaining international saving differences so economists have sometimes suggested that national saving differences may be explained by cultural differences this paper tests the hypothesis that cultural factors influence saving by comparing saving patterns of immigrants to canada from different cultures using data from the canadian survey of family expenditures we find no evidence of cultural effects on saving

voting with ballots and feet existence of equilibrium in a local public good economy abstract this paper proves a general existence theorem for equilibrium in a local public good economy with free mobility by extending greenberg and shitovitz s j econ theory46 1988 223 236 approach each jurisdiction s collective choice rule is the d majority voting rule proposed by greenberg econometrica47 1979 627 636 spillover effects of local public goods externalities due to the population distribution and snob effects are all allowed we need transitivity and completeness of preferences these assumptions are not used by greenberg and shitovitz because they do not permit consumers to move free mobility of consumers causes disconnections in consumption sets a problem addressed here journal of economic literatureclassification numbers c62 d72 h72 r13

income segregation and local progressive taxation empirical evidence from switzerland this study investigates spatial income segregation in fiscally decentralized urban areas the theoretical part proposes the progressivity of local income taxes as a new theoretical explanation for income segregation the empirical part studies how income tax differentials across municipalities affect the households location decisions i use data from the swiss metropolitan area of basel that contains tax information on all moving households in 1997 the location choice of the households is investigated within the framework of the random utility maximization model different econometric specifications of the error term structure such as conditional logit nested logit and multinomial probit are compared the empirical results show that rich households are significantly and substantially more likely to move to low tax municipalities than poor households this result holds after controlling for alternative explanations of segregation social interactions and distance from the central business district are established as other major factors for income segregation households in general tend to choose locations close to other households like themselves

limited stock market participation among renters and homeowners the stock market participation rate among homeowners is twice as high as among renters this paper builds a life cycle portfolio choice model with endogenous housing tenure choice a stylized form

mobility and redistribution the ability of individuals to move freely from one jurisdiction to another is generally seen as a constraint on the amount of redistribution that each jurisdiction within a system of governments can undertake in this paper we look at this proposition by developing a positive analysis of income redistribution by local governments in a federal system we ask how much redistribution occurs when only local governments can have tax transfer instruments individuals can move freely among jurisdictions and voters in each jurisdiction are fully aware of the migration effects of redistributive policies local redistribution is shown to induce sorting of the population with the poorest households located in the communities that provide the most redistribution while the threat of out migration affects the potential for redistribution our results suggest that significant local redistribution is nonetheless feasible numerical computations indicate that the proportion of residents who are renters is a major factor affecting the local choice of level of redistribution

the intergenerational transmission of risk and trust attitudes recent theories endogenize the attitude endowments of individuals assuming that they are shaped by the attitudes of parents and other role models this paper tests empirically for the relevance of three aspects of the attitude transmission process highlighted in this theoretical literature 1 transmission of attitudes from parents to children 2 an impact of prevailing attitudes in the local environment on child attitudes and 3 positive assortative mating of parents which enhances the ability of a parent to pass on his or her attitudes to the child we focus on two fundamentally important attitudes willingness to take risks and willingness to trust others we find empirical support for all three aspects providing an empirical underpinning for the literature an investigation of underlying mechanisms shows that socialization is important in the transmission process various parental characteristics and aspects of family structure are found to strengthen the socialization process with implications for modeling the socialization production function and for policies focused on affecting children s non cognitive skills the paper also provides evidence that the transmission of risk and trust attitudes affects a wide variety of child outcomes implying a potentially large total effect on children s economic situation

poor little rich kids the role of nature versus nurture in wealth and other economic outcomes and behaviors wealth is highly correlated between parents and their children however little is known about the extent to which these relationships are genetic or determined by environmental factors we use administrative data on the net wealth of a large sample of swedish adoptees merged with similar information for their biological and adoptive parents comparing the relationship between the wealth of adopted and biological parents and that of the adopted child we find that even prior to any inheritance there is a substantial role for environment and a much smaller role for pre birth factors and we find little evidence that nature nurture interactions are important when bequests are taken into account the role of adoptive parental wealth becomes much stronger our findings suggest that wealth transmission is not primarily because children from wealthier families are inherently more talented or more able but that even in relatively egalitarian sweden wealth begets wealth we further build on the existing literature by providing a more comprehensive view of the role of nature and nurture on intergenerational mobility looking at a wide range of different outcomes using a common sample and method we find that environmental influences are relatively more important for wealth related variables such as savings and investment decisions than for human capital we conclude by studying consumption as an overall measure of welfare and find that like wealth it is more determined by environment than by biology

determinants of household energy consumption in india improving access to affordable modern energy is critical to improving living standards in the developing world rural households in india in particular are almost entirely reliant on traditional biomass for their basic cooking energy needs this has adverse effects on their health and productivity and also causes environmental degradation this study presents a new generic modelling approach with a focus on cooking fuel choices and explores response strategies for energy poverty eradication in india the modelling approach analyzes the determinants of fuel consumption choices for heterogeneous household groups incorporating the effect of income distributions and traditionally more intangible factors such as preferences and private discount rates the methodology is used to develop alternate future scenarios that explore how different policy mechanisms such as fuel subsidies and micro financing can enhance the diffusion of modern more efficient energy sources in india

strong tiebout equilibrium under restricted preferences domain abstract we investigate the existence and give a partial characterization of a strong tiebout equilibrium which consists of an endogenously formed partition of the individuals into disjoint jurisdictions with each jurisdiction producing and financing its own public goods and moreover there exists no group of individuals who can all benefit by establishing their own community in particular no single individual finds it desirable to migrate from his equilibrium jurisdiction the existence proof makes use of the notion of consecutive games which we introduce and show that for such games there always exists a partition with a nonempty core

does endogenous formation of jurisdictions lead to wealth stratification conditions under which endogenous processes of jurisdiction formation entail wealth stratification are examined in a model where unequally wealthy households with identical preferences form jurisdictions in order to produce a public good financed by proportional taxation we define a stable jurisdiction structure to be a partition of the households into jurisdictions that is immune to individual deviations we define a jurisdiction structure to be wealth stratified when each jurisdiction is composed of households who form an interval with respect to the ordering of their wealth we show that a necessary and sufficient condition for the stratification of any stable jurisdiction structure is for the individual preferences for the public and the private good to exhibit a relation of gross substitutability complementarity between the public good and the private good that is independent from prices and wealth

mothers and sons preference formation and female labor force dynamics this paper argues that the growing presence of a new type of man one brought up in a family in which the mother worked has been a significant factor in the increase in female labor force participation over time we present cross sectional evidence showing that the wives of men whose mothers worked are themselves significantly more likely to work we use variation in the importance of world war ii as a shock to women s labor force participation as proxied by variation in the male draft rate across u s states to provide evidence in support of the intergenerational consequences of our propagation mechanism

cultural determinants of household saving behavior relying on the epidemiological approach we show that culture is a significant driver of household saving behavior second generation immigrants from countries that put strong emphasis on thrift or wealth accumulation tend to save more in germany we confirm these results in data from the uk by linking parents to their children we show that these two cultural components affect the saving behavior of both first generation immigrants and their children and also provide suggestive evidence that long term orientation is related to saving behavior through the intergenerational transmission of language

tiebout sorting and neighborhood stratification tiebout s classic 1956 paper has strong implications regarding stratification across and within jurisdictions predicting in the simplest instance a hierarchy of internally homogeneous communities ordered by income typically urban areas are less than fully stratified and the question arises how much do departures from standard tiebout assumptions contribute to observed within neighborhood mixing this paper quantifies the separate effects of employment geography via costly commuting and preferences for housing attributes on neighborhood stratification it does so using an equilibrium sorting model estimated with rich census micro data simulations based on the model and credible preference estimates show that counterfactual reductions in commuting costs lead to marked increases in racial and education segregation and to a lesser degree increases in income segregation given that households now find it easier to locate in neighborhoods with like households while turning off preferences for housing characteristics increases racial segregation especially for blacks doing so reduces income segregation indicating that heterogeneity in the housing stock serves to stratify households based on ability to pay further we show that differences in housing help to accentuate differences in the consumption of local amenities

existence of voting market equilibria abstract we show the existence of an equilibrium in a model where private goods are allocated by markets and the public good bad is allocated by majority rule voting

financial trouble across generations evidence from the universe of personal loans in denmark do people end up in financial trouble simply because of adverse shocks to income and wealth or is financial trouble related to persistent differences in financial attitudes and behavior that may be transmitted from generation to generation we address this question using a new administrative data set with longitudinal information about defaults for the universe of personal loans in denmark we provide non parametric evidence showing that the default propensity is more than four times higher for individuals with parents who are in default compared to individuals with parents not in default this intergenerational relationship is apparent soon after children move into adulthood and become legally able to borrow the intergenerational relationship is remarkably stable across age groups levels of loan balances parental income levels childhood school performance time periods and different measures of financial trouble basic theory points to three possible explanations for the correlation across generations in financial trouble i children and parents face common shocks ii children and parents insure each other against adverse shocks iii financial behavior differs across people and is transmitted across generations our evidence indicates that the last explanation is the most important finally we show that the intergenerational correlation in financial trouble is not fully incorporated in interest setting on loans pointing to the existence of an interest rate externality in the market for personal loans

imputing consumption from income and wealth information we investigate the feasibility of deriving a measure of total expenditure at the household level from administrative micro data on income and wealth we use danish administrative data that provides measures of disposable income and the holding of different assets at the end of the year the ability to link the households in the 1994 6 danish expenditure survey to their administrative data for the years around the survey year offers a unique possibility for constructing a measure of total expenditure and of checking directly on the reliability of the imputation the results are promising