median voters or budget maximizers evidence from school expenditure referenda some readers may have found these results of greater interest were we able to confirm the directional hypotheses of the certainty setter model in addition to finding that spending is related to the reversion the much weaker prediction of the uncertainty model yet the failure of the certainty when base elections were optional their infrequent occurrence might be expected under either a median voter or a setter model for those districts that did hold base elections the observations appear consistent with a setter model but are either inexplicable by or inconsistent with a median voter model finally both a the relationship between the number of budget elections and the presence of base elections and b the outcome of mandatory base elections in 1978 provide a set of observations that are challenging to either model a similar challenge was posed by our investigation of budget elections when we called attention to the inadequacy of static full information models rather than resolving the question of the simple setter model against the simple median voter model our results indicate that both may be inappropriate and that endeavors dealing with complexities omitted here are warranted

interest rates and money in the measurement of monetary policy over the last 25 years a set of influential studies has placed interest rates at the heart of analyses that interpret and evaluate monetary policies in light of this work the federal reserve s recent policy of quantitative easing with its goal of affecting the supply of liquid assets appears to be a radical break from standard practice alternatively one could posit that the monetary aggregates when measured properly never lost their ability to explain aggregate fluctuations and for this reason represent an important omission from standard models and policy discussions in this context the new policy initiatives can be characterized simply as conventional attempts to increase money growth this view is supported by evidence that superlative divisia measures of money often help in forecasting movements in key macroeconomic variables moreover the statistical fit of a structural vector autoregression deteriorates significantly if such measures of money are excluded when identifying monetary

governmental behavior in representative democracy a synthesis of the theoretical literature what is the impact of bureaucratic behaviors on tax rates what is preferable a bureaucrat or a partisan politician does a flypaper effect occur when lobby groups influence public policies this article tries to answer these questions by analyzing and comparing six different models of public choice 1 the median voter model 2 the leviathan model 3 the slack maximizing model 4 a general model of bureaucracy 5 the partisan politicians model and 6 a general model of lobbying among several results it is shown that the median voter s income and tax share almost always play a significant role in the design of the public good tax package even if the government does not explicitly try to maximize the median voter s utility the article also provides a synthesis of the positive analysis of the flypaper effect

the inflation tax in a real business cycle model money is incorporated into a real business cycle model using a cash in advance constraint the model economy is used to analyze whether the business cycle is different in high inflation and low inflation economies and to analyze the impact of variability in the growth rate of money in addition the welfare cost of the inflation tax is measured and the steady state properties of high and low inflation economies are compared

endogenous objectives and the evaluation of targeting rules for monetary policy recent research in monetary economics has followed the advice of mccallum 1988 robustness properties of a rule for monetary policy carnegie rochester conference series on public policy 29 173 203 and investigated the robustness properties of monetary policy rules by evaluating them in a variety of models evaluation across models is typically based on an exogenously specified loss function however the theory on which many recent monetary policy models are based implies that changes in the structure of the model also have consequences for the policy objectives the central bank should pursue objectives are endogenous not exogenous to the model in this paper i investigate the impact of endogenous objectives on the evaluation of targeting rules for monetary policy r 2005 elsevier b v all rights reserved

dumping adjustment costs and uncertainty abstract domestic demand uncertainty in the presence of adjustment costs can cause profit maximizing firms to sell output abroad at a loss firms may dump output at prices below long run marginal and average productions costs with probability arbitrarily close to one the model predicts dumping is particularly likely in process industries such as steel closed form dumping solutions and interesting comparative statics are obtained also the effect of domestic competition on dumping is examined i find domestic competition increases total dumping although a monopolist maximizing output subject to a zero expected profit constraint will dump more than a competitive industry

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

historical monetary policy analysis and the taylor rule this study examines the usefulness of the taylor rule framework as an organizing device for describing the policy debate and evolution of monetary policy in the united states monetary policy during the 1920s and since the 1951 treasury federal reserve accord can be broadly interpreted in terms of this framework with rather surprising consistency in broad terms during these periods policy has been generally formulated in a forward looking manner with price stability and economic stability serving as implicit or explicit guides as early as the 1920s measures of real economic activity relative to normal or potential supply appear to have influenced policy analysis and deliberations confidence in such measures as guides for activist monetary policy proved counterproductive at times resulting in excessive activism such as during the great inflation and at the brink of the great depression policy during the past two decades is broadly consistent with natural growth targeting variants of the taylor rule that exhibit less activism

bureaucracy and the divisibility of local public output further econometric evidence based on the theory of bureaucracy in contrast to the median voter model expenditure functions are estimated for various municipal services provided by some smsa cities various econometric measures and diagnostics are applied to the sample data to test for the incidence of multicollinearity heteroscedasticity and influential observations the test results indicate the absence of any econometric problems and the empirical results can be taken as statistically meaningful and to a large extent precise over the range of smsa cities included in the estimated model the presented econometric evidence points out that in these communities the municipal services are private in nature and there exist no economies of scale in the provision of these services although these services reveal no pure publicness or quasi publicness they are provided by local governments through a collective choice mechanism perhaps due to the inherent problems associated with their provision such as the cities lack of knowledge of individuals preferences and tastes and the anticipated potential free rider problem

money new keynesian macroeconomics and the business cycle abstract we show in this paper that the typical modern business cycle cannot be reduced to the real business cycles archetype a monopolistic competition model with price adjustment costs affected by technological and monetary shocks better mimics the economic fluctuations in two countries with very different cyclical properties namely france and the united states in our model monetary shocks are necessary to reproduce the standard deviation of output the money output correlation the labour productivity worked hours relative standard deviation the labour productivity worked hours correlation and the mark up output correlation with two independent shocks one real more specifically defined than the solow residual and one nominal the model gives an answer to some empirical puzzles which were left unexplained by traditional rbc models

the municipal wage and employment effects of public infrastructure we empirically examine the relationship between public capital and municipal employment levels and changes using a sample of 48 large us cities during the 1970 80 period we find greater stocks of public capital are associated with a higher demand for and supply of municipal workers holding all other factors constant the effect of a 10 per cent greater level of per capita public capital stock is a 0 6 and 12 9 per cent higher demand for and supply of municipal workers in the short run reduced form estimates indicate a net positive effect on municipal employment but no net effect on municipal wages these findings are supported by a fixed effect model estimation

the expenditure effects of restricting competition in local public service industries the case of special districts the purpose of this paper has been to extend the type of positive economic analysis of the urban public economy that has been initiated by wagner and martin 1978 wagner and weber 1975 ostrom et al 1976 and others the hypothesis was tested that restricting the growth of single purpose special districts renders local service industries more monopolistic and should therefore increase local public expenditure levels evidence brought forth indicates that the effect of such restrictions imposed in two states california and oregon was to increase general per capita expenditures ceteris paribus per capita expenditures on water supply and fire protection two services frequently provided by special districts were also seen to increase dramatically after controlling for other supply and demand determinants of local public expenditures thus the empirical test of the last section supports the monopoly enhancing view of special district growth restrictions and leads us to reject the alternative reformist hypothesis that consolidating or annexing special districts will lead to improved hierarchical organization of local government and diminish the cost of providing local public services

targeting nominal income in a dynamic model the author analyzes the choice of monetary policy rule in a perfect foresight planning model maximizing agents plan their lifetime consumption decisions in the face of two rigidities first households hold money to aid trade second today s price level is inherited from past contracting decisions so that changes in nominal aggregate demand fall on output in the short run given these rigidities the central bank can set real balances in the short run and the author compares two mu percent rules his theoretical results suggest that the choice between fixed money growth and fixed nominal income growth rules is an empirical assessment that depends on the distribution of shocks to the economy copyright 1990 by ohio state university press

monetary policy rules macroeconomic stability and inflation a view from the trenches i estimate a forward looking monetary policy reaction function for the federal reserve for the periods before and after paul volcker s appointment as chairman in 1979 using information that was available to the fomc in real time from 1966 to 1995 the results suggest broad similarities in policy and point to a forward looking approach to policy consistent with a strong reaction to inflation forecasts during both periods this contradicts the hypothesis based on analysis with ex post constructed data that the instability of the great inflation was the result of weak fomc policy responses to expected inflation a difference is that prior to volcker s appointment policy was too activist in reacting to perceived output gaps that retrospectively proved overambitious drawing on contemporaneous accounts of fomc policy i discuss the implications of the findings for alternative explanations of the great inflation and the improvement in macroeconomic stability since then

congestion function specification and the publicness of local public goods abstract this paper is about the measurement of congestion within the median voter demand framework the model of congestion traditionally used in the literature and four others are compared and tested in a median voter framework the results show that a more flexible functional form which imposes fewer a priori restrictions on the data does at least as good a job of explaining variations in local government expenditures furthermore it is shown that measured publicness of local public goods depends entirely on the a priori restrictions imposed on the congestion function

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

agricultural policy reform in zambia the dynamics of policy formulation in the second republic abstract the agricultural policy reform process in africa during the 1980s has been slow partly because it has neglected a number of key factors analysis of zambia s experience during the second republic suggests that greater attention needs to be given to institutional heritage political acceptability the diversity of policy making organizations and the policy freedom of subsectoral organizations neglect of these issues has led to difficulties in getting policy makers to even conceptualize reform and has led to much concern over the political implications of insensitive reform proposals

a positive theory of discretionary policy the cost of democratic government and the benefits of a constitution we offer an explanation of government s preference for discretionary policy action the main elements are asymmetric information and the ability and desire of governments to maximize reelection prospects discretionary policy imposes a social cost we show that the cost is eliminated if all voters have the same information as the government an optimal state contingent policy rule that precommits government through a constitution eliminates the cost by removing government s opportunities to exploit its informational advantage rules of this kind and constitutional restrictions are difficult to enforce in the presence of uncertainty and different information available to government and the public

cost sharing versus block funding in a federal system a demand systems approach this paper employs a maximizing framework consistent with the axioms of consumer preference to analyze local government s choice of spending on different social services within this framework it is possible to include both block funding and cost sharing intergovernment transfer schemes canada s movement to block funding from the cost sharing method of financing provincial expenditures on hospitals medical care and post secondary education is analyzed the results indicate that the provincial governments actions are generally consistent with a significant maximizing model of consumer behavior and that the change to block funding had a significant impact on real provincial funding of some previously cost shared social services

a politico economic approach to intergovernmental lump sum grants this paper develops a positive approach to grant design when the central government and a lobby of local governments are the main agents it develops the hypothesis that the regressivity or progressivity of per capita grants regarding community size is ceteris paribus related to the structure of the lobbying activities of local governments and is independent of hypothetical economies or diseconomies of scale in the production of local public goods an encompassing lobby organisation using a one mayor one vote system of representation supports the regressivity of per capita grants while under proportional representation the lobby will support a design of per capita grants which is progressive towards community size an empirical analysis of lump sum grants in portugal supports the politico economic hypothesis and rejects the hypothesis that economies of scale is the main explanatory cause for the observed regressivity of per capita grants

simple versus optimal rules as guides to policy this paper compares the performance of different policy rules our comparisons focus on simple feedback rules versus rules which are optimal given knowledge of the correct economic structure and the appropriate loss function for the policymaker first we compare rule performance when the correct model is not known second we compare rule performance with respect to the frequency specific behavior for variables of interest taken as a whole our results indicate how the case for a model specific optimal rule can break down when one relaxes the assumption that the true model is known as well as the assumption that the appropriate loss function is known links are made to the literature on monetary policy

the quest for prosperity without inflation abstract in recent years activist monetary policy rules responding to inflation and the level of economic activity have been advanced as a means of achieving effective output stabilization without inflation advocates of such policies suggest that their flexibility may yield substantial stabilization benefits while avoiding the excesses of overzealous discretionary fine tuning such as is thought to characterize the experience of the 1960s and 1970s in this study i present evidence suggesting that these conclusions are misguided using an estimated model i show that when informational limitations are properly accounted for activist policies would not have averted the great inflation but instead would have resulted in worse macroeconomic performance than the actual historical experience the problem can be attributed in large part to the counterproductive reliance of these policies on the output gap the analysis suggests that the dismal economic outcomes of the great inflation may have resulted from an unfortunate pursuit of activist policies in the face of bad measurement specifically overoptimistic assessments of the output gap associated with the productivity slowdown of the late 1960s and early 1970s

fiscal illusion at the local level empirical evidence for the flemish municipalities fiscal illusion refers to a systematically biased perception of fiscal parameters due to demand side error ignorance or supply side abusive behaviour as such it is a component of a more general tax choice framework

the causes of government expenditure growth a survey of the u s evidence abstract the growth of government budgets can be broken down into a institutional and institutional components the former component the familiar substitution income and population public goods tax sharing effects is estimated to contribute about two fifths of the growth of u s government spending the latter component rent seeking political redistributions bureaucracy and perceptual informational impedimentia is important too but an exact imputation cannot be asserted given the state of the art in empirical public choice theory the cross effects on spending of the growth of regulation and tax preferences or tax expenditures though interesting is not pursued

targeting nominal income a note this paper compares nominal income and monetary targets in a standard aggregate demand aggregate supply framework if the desirability of policies is measured by their effect on the unconditional variance of output nominal income targeting is preferable if and only if the aggregate elasticity of demand for real balances is greater than one this is precisely the opposite of the condition that in bean 1984 is sufficient to make nominal income targeting preferable this points out the importance of specification of supply and of objective function in work on nominal income targeting this abstract was borrowed from another version of this item

monetary policy rules based on real time data this paper examines the magnitude of informational problems associated with the implementation and interpretation of simple monetary policy rules using taylor s rule as an example i demonstrate that real time policy recommendations differ considerably from those obtained with ex post revised data further estimated policy reaction functions based on ex post revised data provide misleading descriptions of historical policy and obscure the behavior suggested by information available to the federal reserve in real time these results indicate that reliance on the information actually available to policy makers in real time is essential for the analysis of monetary policy rules

the median voter model across levels of government the median voter model provides a method of aggregating individual voter s demands to obtain community demand although higher level governments are often assumed to be less responsive to voters than lower level governments it remains an open question whether or not the median voter model which has been found to apply to the lowest tier of the federalist system extends to higher level governments we use the cox specification test to find that the ad hoc model dominates the median model for counties and states the county results are sensitive to the time periods budgetary structure and degree of urbanization

an empirical assessment of the factor supplier pressure group hypothesis the main purpose of this paper has been to empirically assess tullock s factor supplier pressure group hypothesis theory predicted that public employees would be most able to use their political power to expand public spending levels at the local level of government therefore in contrast to the two previous attempts to test this hypothesis the empirical tests focused on the growth oflocal public spending the test results lead to the conclusion that the political power of public employee groups is an important determinant of the growth of local public spending although the extent of their influence is as yet unknown general control personnel and sanitation workers were found to be exceptionally successful at influencing budgetary growth in terms of the former group these results lead me to suspect that the results of bennett and johnson s 1980 research on federal government growth apply to the local public sector as well that is while there may be debate over how much local public spending has increased as a percentage of net national product its composition has changed in that proportionally more resources are being used for the purposes of administrative rule making as is the case with federal governmental regulation increased regulation of the local public economy is sure to have substantial allocative and distributive effects which form an agenda for future research

economic competition and political competition an empirical note this paper has examined the proposition that more concentrated or consolidated metropolitan areas will produce public goods less efficiently than if there were a greater degree of interjurisdictional competition the empirical evidence garnered in section 3 suggests that interjurisdictional competition does tend to reduce the cost of providing local public services and consequently local government expenditure levels

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

are governmental expenditures also sticky evidence from the operating expenditures of public schools abstractexisting research on cost stickiness focuses primarily on for profit companies this study investigates cost behaviour in the public sector a new setting that deserves more research attent

a note on the publicness of local goods evidence from new york state municipalities for more than a decade now the non publicness of goods provided by local governments has been an accepted result in the median voter demand literature mcmillan wilson and arthur 1981 found that publicness was exhausted in ontario towns of more than 10 000 inhabitants but that there were still unexploited economies to collective provision in smaller towns using the original bergstrom and goodman 1973 model and new york state data i find that there is even less evidence of publicness in small towns than in large ones my results call into question the mcmillan wilson and arthur hypothesis une note sur le degre de materialite publique d usage des biens locaux le cas des municipalites de b etat de new york depuis plus d une decennie l un des resultats de la litterature specialisee analysant le comportement de demande du voteur median a ete que les biens fournis par les gouvernements locaux n etaient pas des biens publics mcmillan wilson et arthur 1981 ont montre que le degre de materialite publique d usage etait limite dans le cas des villes de plus de 10 000 habitants en ontario mais qu il existait des economies inexploitees emanant de la fourniture publique dans le cas des plus petites villes a partir du modele de bergstrom et goodman 1973 et de donnees pour l etat de new york l auteur en arrive a la conclusion qu il y a encore moins de materialite publique d usage dans les petites villes que dans les grandes ces resultats remettent en question l hypothese mcmillan wilson et arthur in contrast to the strict samuelsonian dichotomy of pure public and pure private goods the tiebout 1956 and buchanan 1965 models plot goods along a continuum of congestability goods provided by local governments or collectively purveyed and consumed in clubs are described as lying somewhere between the two polar cases the median voter demand model as developed by borcherding and deacon i would like to thank wallace oates william oakland suk kang and an anonymous referee for helpful comments on earlier drafts of this paper they are of course exonerated from association with such errors as may still remain canadian journal of economics revue canadienne d economique xix no 3 august aout 1986 printed in canada imprime au canada 0008 4085 86 568 573 1 50 canadian economics association this content downloaded from 157 55 39 102 on mon 03 oct 2016 05 08 06 utc all use subject to http about jstor org terms publicness of local goods 569 1972 and bergstrom and goodman 1973 incorporates this hypothesis observed levels of local public expenditures are said to reflect the preference of the median voter however the empirical models also include a congestion function intended to reflect the effect of collective consumption on individual enjoyment the function used in the literature is of the form

the effects of non clearing labor markets on the demand for public spending the median voter model suggests the causal sequence distribution spending bureaucracy whereas the bureaucratic model proposes the chain bureaucracy spending distribution in the presence of labor market distortions and underemployment labor contracts we argue that an initial link must be added to each causal chain namely the excess supply of labor in the private sector empirical estimates of both the median voter and bureaucratic models indicate that inter country differences in per capita public spinding are an increasing function of differences in wage rates

invisible hands indigenous knowledge and inevitable fads challenges to public sector agricultural research in ghana abstract support for public sector agricultural research in developing countries is declining at the same time many donors feel that alternative institutions will be able to perform the functions traditionally reserved for the public sector these alternatives include private sector initiatives nongovernment organizations and farmer organizations and highly publicized special projects in agricultural development the logic of these alternatives is examined using evidence on maize research in ghana although each of the alternatives offers contributions and public sector research undoubtedly requires an overhaul emphasis is placed on the necessity of continued suport to building strong public sector agricultural research capacity

bureaucracy monopoly and competition a critical analysis of the budget maximizing model of bureaucracy niskanen has argued that if government bureaus act so as to maximize their budgets they will always produce an output greater than a private industry resulting in efficiency losses to society since the budget maximizing model relates to a number of intersecting areas of organizational analysis from several disciplines it is important to note the limitations of the model first niskanen s result is only true for a bureau which can exercise perfect price discrimination in its relationship with its financial sponsor where this is not the case the bureau may produce less than a private industry second further variation is introduced by examining the effects on a bureau of specialized resources public goods competition and low productivity a bureau which would otherwise produce an output in excess of the competitive level will when any of these factors are present produce an output closer to the competitive output these results may also have significant policy implications since major industrial countries are favoring policies to return some governmental activities to the private sector

economic policy reform in developing countries the role and management of political factors abstract increased recognition of the role of sound economic policies in economic development has stimulated interest in the political and administrative factors that determine policy responses of different developing countries this article provides a critical introduction to three further papers in this special section of world development all of which deal with political and administrative dimensions of economic policy reform certain common themes are isolated and addressed these include the role of political analysis and explanation the concept of political will to undertake reforms and the importance of the implementation phase in the reform process

bureaucracy publicness and local government expenditures revisited comment the empirical literature on the publicness of local government services has observed no significant degree of publicness it is difficult to reconcile these findings with wyckoff s conclusion that bureaucrats prefer pure public goods wyckoff s solution is to suggest that bureaucracy has little effect on operating non capital expenditure decisions this solution however conflicts with the empirical findings of numerous local expenditure and wage studies based on bureau supply models but there is no need to consider this evidence because we have shown that wyckoff s cost assumptions imply that a median voter regime will also operate at a maximum attainable degree of publicness hence we must either reject wyckoff s assumptions or conclude that the nature of the services demanded from local government is such that the maximum attainable degree of publicness is close to no publicness at all in any case wyckoff s conclusions are not supported within the context of his own assumptions

tiebout bias on the demand for local public goods abstract empirical work estimating the demand for local public goods has been based upon the median voter model it has generally proceeded with little consideration given to the possibility of tiebout type migration emphasized in the property value literature in this paper we raise the question of how valid the typical cross section demand estimation procedures are when possible tiebout like migration among jurisdictions is taken into account we find that such procedures are not in fact consistent with a model in which people vote with their feet as well as with ballots we also show that if a full tiebout equilibrium has been achieved in a set of communities there is a simple and obvious way to estimate demands for local public goods which is different from the median voter approach this technique has not to our knowledge been used in existing studies and moreover has some practical as well as theoretical advantages if the workings of the tiebout process are not taken into account more is involved than just impracticality we show that the estimated effects of personal characteristics will generally be biased and that that direction of the bias can usually be determined

bureaucracy and the publicness of local public goods a reply to gonzalez folsom and mehay readers of the literature on bureaucracy will recall that three years ago gonzalez and mehay 1985 published an empirical piece utilizing a slack maximizing model of bureaucratic behavior which concluded that local public goods are really private goods my own article wyckoff 1988a reached the same conclusion using theoretical means the effect of bureaucracy i argued is to bias our results toward the conclusion that local public goods are public in nature so the empirical results showing the opposite cannot be blamed on bureaucracy now in a surprising comment on my paper gonzalez folsom and mehay 1988 gfm assert that i made methodological errors in the process of establishing my result not content with my agreement with their conclusions gfm demand that i reach these results using their methodology gfm insist that i ignore four special cases in my paper each one of these special cases is discussed below in general i find little merit in their arguments each special case is either obviously unrealistic or relates to a question completely different from those discussed in my paper first of all gfm argue that i fail to note that the voter s tax share t is likely to vary with city population n when this correlation is incorporated into my model they say the reverse of my results could occur but there is a fundamental error in allowing t to vary with n the issue in this paper is not whether large cities spend more than small cities nobody disputes this but whether local public goods are public goods or not what we want to know is whether two people can enjoy a public service just as easily as one by including tax considerations in the calculations as they have done gfm confuse crowding effects with changes in spending caused by changes in tax burdens when t is allowed to vary with n we no longer have a measure of the crowding parameter but a composite which cannot answer the question we originally asked an analogy may help clarify gfm s error gfm s approach is equivalent to suggesting that since wealthy people have larger homes and hence larger tax

burden sharing in the nato alliance an empirical test of alternative views this paper undertakes an empirical test of two opposing views of interdependencies among members of military alliances the first view associated with olson and zeckhauser argues that the public good aspect of defense induces free riding behavior by smaller alliance members which imposes a disproportionate burden of supporting the alliance on the larger members a second view argues that nato defense activities produce a mix of outputs some of which are not purely public and some of which may be complementary across nations furthermore the nature of the weapons systems and their relative use by alliance members may induce substantial cooperation by allies the test proposed here analyzes the relationship between defense spending shares of nato members and their population and relative wealth shares a simple model is specified and tested using pooled time series cross sectional data the empirical results indicate more support for the cooperative view of ally relationships than the olson zeckhauser non cooperative model

political explanations of macroeconomic management a survey abstract this paper surveys eight overlapping types of political explanation for patterns of macroeconomic management in the third world 1 historical traditions 2 socio structural determinants 3 the self interest of politically powerful sectors 4 entrenched characteristics of the political system 5 formal properties of the political institutions 6 the influence of economic ideologies 7 vicious virtuous circles and 8 a residual category of conjunctural factors it then considers the scope and limitations of such explanations and reassesses the notion of political constraints on economic optimization

the impact of bad writing in economics we find significant style differences between articles written by economists for their professional journals and articles by the same economists in the wall street journal we find no evidence that style influences the professional success of economists which suggests that the private rewards to improving the quality of writing are low indeed each community of scholars has probably adopted a professionally correct writing style from which its members diverge little however scholars do alter their rhetorical style to communicate effectively with audiences other than the professional community this suggests that intra and inter group written communication by economists is efficient

urban safety in vancouver allocation and production of a congestible public good this paper is a simultaneous exploration of the within city production of safety with the endogenous allocation of public inputs police three issues are central one is an examination of the local government allocation function second is that safety is specified as a congestible public service consistent with club theory finally the model is estimated using a survey measure of crime these innovations are due to a unique data set containing observations by neighborhoods in the city of vancouver the results are crucial for illustrating crime deterrence as well as the local public good nature of safety

municipal residency laws and local public budgets prior research has shown that residency laws increase the productivity of municipal employees which tends to reduce per unit operating cost however this gain in efficiency appears to have been lost when one considers that public employee groups tend to be high demanders who have a greater tendency to vote in local elections and to support expenditure increases bennett and orzechowski 1983 our results tend to provide additional evidence to support the findings of previous studies that public employee groups tend to exert a disproportionate impact on local budgetary decisions

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

monetary targets as a policy rule lessons from the swiss experience abstract this paper provides a survey and analysis of swiss monetary policy since the shift to a floating exchange rate in 1973 although the swiss national bank snb by international comparison managed to achieve a high degree of price stability it could not prevent temporary bursts of inflation i argue that the problem lay in an inappropriate snb response to such disturbances as unexpected exchange rate shocks and show that in constructing optimum feedback rules the snb must take account of the logs in the effects of monetary policy i also discuss the snb s current strategy resting on a medium term growth target for the monetary base

specification of policy rules and performance measures in multicountry simulation studies abstract much recent analysis of international monetary and fiscal policy issues has been conducted by stochastic simulations with multicountry econometric models in these studies it has become standard practice to consider alternative policy rules of a form that calls for departures of a policy instrument from some baseline reference path that are proportional to deviations of a specified target variable from its own baseline path the present paper argues that this standard rule form is seriously defective for such issues because th eimplied rules often fail to be operational and have associated performance measures that can be misleading in important cases jel c50 f30

the publicness of local public goods evidence from ontario municipalities recent studies of local public good provision report publicness parameter estimates of about one indicating private good characteristics this empirical investigation of a wider range of communities obtains parameter estimates of significantly less than one indicating a high degree of publicness exists in smaller municipalities and within the service areas of individual public facilities comprising the supply network in larger centres it is argued that the observed values of the publicness parameters have no normative significance as to the merits of public versus private provision la materialite publique d usage des biens publics locaux resultats d une etude de municipalites ontariennes les etudes recentes sur l approvisionnement de biens publics locaux indiquent des coefficients de materialite publique d usage autour de l unite c est a dire que les biens publics locaux ont de fortes caracteristiques semblables aux biens prives ce memoire presente les resultats d un enquete empirique d un large eventail de communaut6s locales et en arrive a des valeurs pour le coefficient de materialite publique d usage qui sont bien moins que l unite et qui donc indiquent un haut degre de materialite publique d usage dans les petites municipalites mais aussi dans les zones de service d infrastructures particulieres parc bibliotheque poste de pompier etc qui forment le reseau d approvisionnement de biens publics dans les grands centres les auteurs suggerent que les valeurs observees de ces coefficients de materialite publique d usage n ont aucune portee normative et donc ne sauraient arbitrer les merites relatifs d un approvisionnement prive ou public de certains biens

municipal annexation and local monopoly power we have found that the fiscal power of a city can be increased by extension of its borders within a land area that is homogeneous with respect to earning opportunities even when numerous rival jurisdictions exist in the area we hypothesized that extending municipal boundaries will have a positive effect on discretionary outlays and on expenditures per capita the evidence presented supports these hypotheses furthermore municipal wages appear to be significantly increased in cities experiencing annexation growth therefore we would expect to find that municipal employees are more inclined to favor annexation than the rest of the electorate from a policy standpoint this study suggests that significant perverse effects on fiscal efficiency may follow adoption of legal reforms that facilitate the ability of municipalities to extend their borders or that restrict the formation of new municipalities

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

bureaucracy and the divisibility of local public output the empirical results of this paper are derived from a monopoly view of local government decisionmaking in contrast to the competitive view offered by earlier researchers that our results are similar to earlier findings lends additional support to the conclusion that local output is largely private in nature other than park and recreation services there appear to be no economies in consumption for local services nor any economies of density larger cities do not appear to be more efficient than smaller cities 10 of course this result holds only for the sample of cities used here and does not rule out scale economies for communities smaller than those in our sample i e below 25 000 population

the impact of congestion on local public good production abstract this paper models local public goods production where allocation of the publicly provided input occurs simultaneously with production of the final service output the framework models local public goods as developed in club theory where congestion is an increasing function of population central to identification of the model is that the quantities of the input police are differentiated from the produced output safety estimation is across neighborhoods within a single city the results show there is a very low elasticity of congestion on average but safety in some neighborhoods in more congested than private goods

resuscitating the ad hoc loss function for monetary policy analysis working with micro founded loss functions to derive and analyse optimal policy ensures consistency with the model used and overcomes the misleading prescriptions that result from using exogenous ad hoc loss functions however when allowance is made for the fact that different theories of inflation persistence can result in the same observationally equivalent hybrid new keynesian phillips curve such conclusions may no longer hold each theory implies its own loss function and will therefore result in different policy prescriptions in this paper i analyse the welfare consequences of using ad hoc loss functions versus the micro founded but potentially incorrect policy objectives

nominal gdp targeting and the taylor rule on an even playing field some economists advocate nominal gdp targeting as an alternative to the taylor rule these arguments are largely based on the idea that nominal gdp targeting would require less knowledge on the part of policymakers than a traditional taylor rule in particular a nominal gdp targeting rule would not require real time knowledge of the output gap we examine the importance of this claim by amending a standard new keynesian model to assume that the central bank has imperfect information about the output gap and therefore must forecast the output gap based on previous information forecast errors by the central bank can then potentially induce unanticipated changes in the short term nominal interest rate distinct from a standard monetary policy shock we show that forecast errors of the output gap by the federal reserve can account for up to 13 of the fluctuations in the output gap in addition our simulations imply that a nominal gdp targeting rule would produce lower volatility in both inflation and the output gap in comparison with the taylor rule under imperfect information

the median voter hypothesis evidence from general purpose local governments the median voter hypothesis mvh represents a much used as well as much criticized tool in the hands of public finance economists to evaluate the mvh this paper applies the cox specification test using data from general purpose municipal governments the cox test allows for possible simultaneous rejection of the mvh and all tested models thus providing stricter criteria than applied to date in empirical mvh analyses the test results reveal that the mvh is appropriate for explaining the aggregate behavior of municipal governments but not specific services further the single service and single tax base assumptions are not critical to the empirical mvh performance

the effects of grants in aid on state and local expenditures abstract this paper develops econometric methods to estimate the effect of the piecewise linear budget constraints created by grant formulas in which the subsidy rate is not constant over expenditures e g closed end grants the methods are applied to the afdc program the results show that because of the kinked nature of the grant formula 1 the present federal formula actually increases cross state inequality in afdc benefits 2 several subsidy rates in the formula actually reduce benefits and 3 the so called flypaper effect disappears

institutions efficiency and the strategic behaviour of sponsors and bureaus abstract the over production associated with bureaucratic production is examined in a general equilibrium environment in which the bureau and its sponsor behave strategically seemingly minor modifications in institutional settings give major differences in nash equilibrium outcomes the non equivalence of institutional settings suggests that over production or under production by bureaus can be a result of the institutions governing the decision process as well as the preferences of the bureau for the size of the bureau

size persistence and interrelation of nominal and real shocks some evidence from four countries abstract one of the major themes in karl brunner s work is the comparative size persistence and interaction of real and monetary impulses the paper uses a univariate multi state kalman filter to forecast quarterly values of money prices output velocity and exchange rates during the bretton woods and post bretton woods monetary regimes and to compute shocks or impulses vector autoregression is used to relate the shocks and to compare the two regimes several propositions are tested including the phillips curve currency substitution reverse causation and the role of monetary impulses as a cause of fluctuations in output and prices

a bureaucratic theory of flypaper effects abstract one well documented pattern in local public finance is that in comparison with what is spent out of residents private income a disproportionate amount of lump sum intergovernmental aid is used to increase expenditures rather than to reduce local taxes this paper shows how a bureaucratic model of the type suggested by niskanen bureaucracy and representative government aldine atherton chicago 1971 can be used to explain this behavior an empirical test of the model using 115 small governments in michigan suggests that this bureaucratic model explains capital expenditures well while operating expenditures appear to be better explained by the standard median voter model

who makes economic policy in africa and how abstract to understand the considerable detorioration in the economic policies of many african countries during the 1970s it is essential to go beyond the economist s analytical models the pressing drive of authoritarian rulers to survive adds an important dimension to economic policy choices although constrained to varying degrees by ethnic regional and class loyalties among populations they govern african rulers enjoy a measure of autonomy in making policy they did not react speedily to the growing economic crisis during the early 1980s however most reforms were undertaken under pressure and many policy efforts failed some countries managed to sustain reforms but the important question is how to go beyond these idiosyncratic cases

assessing policy implementation success observations from the philippines abstract this article analyzes the establishment and start up of the one stop shop inter agency tax credit and duty drawback center in the philippines it briefly describes the policy change agenda that was embodied in the center s creation and outlines developments during its first eight months of existence it explores the impact of bureaucratic complexity on the ability of center management and staff at the department of finance dof to implement the policy reform agenda finally it examines to what extent the center s managers actually adopted the principles and techniques of strategic management and if they did what difference it made to successful implementation of that policy agenda

the elusive flypaper effect abstract the flypaper effect is the common empirical result that lump sum intergovernmental grants stimulate more local government spending than increases in private income which are theoretically equivalent in this paper four of the best known explanations of the flypaper effect are tested using data from michigan school districts none of these explanations are confirmed by the data the cause of the flypaper effect is likely to be much more deeply rooted in the nature of local decision making than is currently recognized

what is new keynesian economics this research was supported by the national science foundation i am grateful to george williams for help with the data and to steven allen laurence ball olivier j blanchard timothy bresnahan charles calomiris dennis carlton robert chirinko russell cooper stanley fischer herschel grossman r glenn hubbard david laidler john leahy assar lindbeck n gregory mankiw david romer julio rotemberg dennis snower john taylor andrew weiss and two anonymous referees for comments on one or more earlier drafts i am also indebted to michael parkin and edmund s phelps for helping to establish the etymology of the phrase new keynesian

what is wrong with taylor rules using judgment in monetary policy through targeting rules it is argued that inflation targeting is best understood as a commitment to a targeting rule rather than an instrument rule e ither ageneral targeting rule explicit objectives for monetary policy or a specific targeting rule a criterion for the forecasts of the target variables to be fulfilled essentially the equality of the marginal rates of transformation and substitution between the target variables targeting rules allow the use of judgment and extramodel information are more robust and easier to verify than optimal instrument rules and they can nevertheless bring the economy close to the socially optimal equilibrium

after the decision implementing policy reforms in developing countries abstract implicit in many reform proposals is a model of the policy process that is roughly linear a proposed reform gets on the agenda for government action a decision is made on the proposal and the new policy or institutional arangement is implemented either successfully or unsuccessfully this article presents an alternative interactive model of implementation that focuses on the conflict and reactions that are evoked by efforts to bring about changed policy or institutional contexts for development and the resources that policy makers and managers are likely to require to sustain a reform in the face of such reactions central to the analysis is the assertion that characteristics of the reform being implemented will largely determine the kind of conflict it engenders where such reaction is likely to become manifest and what resources are needed for sustainability the analysis suggests a framework for the strategic management of reform initiatives

monetary policy rules targets and shocks the proper conduct of monetary policy is now once again wide open to discussion an immediate practical controversy concerns the role of central banks in recovery from the world depression underlying that debate are some unresolved fundamental issues regarding the responsibilities goals targets and operating procedures of central banks monetarism won the hearts and minds of many economists and most central bankers in the 1970s now it seems to be losing adherents and influence partly because it is blamed for the severe depression partly because regulatory institutional and technological changes have altered the meanings and velocities of monetary aggregates last summer chairman volcker and his federal reserve colleagues suspended their monetarist targets to almost universal relief the severity of the recession the international debt crisis and the pace of change in financial structure were all good reasons it is doubtful though possible that money stock targets will regain their previous status if not what philosophy of monetary control what framework for the conduct of policy will replace them a host of monetary architects are ready to fill the vacuum some would restore the gold standard or make paper money convertible into other commodities some would replace intermediate monetary aggregates with other targets the monetary base nominal gnp or final sales total domestic credit price indexes or their rates of change exchange rates some advocate irrevocable commitment to announced

testing bureaucratic influence on local school expenditures by comparing survey and expenditure data previous empirical studies of bureaucratic power have employed testing procedures that are sensitive only to complete bureaucratic power in which the bureaucrat is able to force an all or nothing choice on his legislative sponsor this paper suggests a test for incomplete bureaucratic power in which micro based survey estimates of the cost elasticity of demand and marginal propensity to spend out of lump sum aid are compared with estimates of these same parameters taken from governmental expenditure studies empirical tests with 205 non smsa school districts in michigan yield results that are consistent with incomplete bureaucratic power copyright 1991 by mit press

on measuring congestion of local public goods abstract using data for fire protection services this brief paper provides empirical evidence in large part demonstrating the existence of the zoo effect identified by oates the zoo effect implies an upward bias in the measurement of congestion in local public good provision resulting from the lack of a range or quality of service measure the introduction of a quality measure is found to reduce estimates of the degree of congestion in fire protection services

an examination of preferences for local public sector outputs relatively unique data on the costs of public services for local governments in victoria australia are used to estimate a system of demand equations and to test alternative specifications of the underlying preferences using a translog model symmetry conditions are rejected so the data are not consistent with constrained utility maximization a nonparametric test confirms that result conditional on symmetry tests reject homogeneity and the additivity of preferences and also the separability of personal and property services copyright 1988 by mit press

limits of state strength toward an institutionalist view of economic development nomic development attempted to explain why growth did not occur occurred slowly or occurred in a distorted dependent form the impressive economic performances of the east asian newly industrialized countries nics have changed this many noneconomists as well as some economists are now focusing on the political bases of development rather than underdevelopment there are differences among these analysts some distance themselves from neoclassical economics by emphasizing the importance of getting the prices wrong others acknowledge the utility of market conforming policies but common to recent studies of nics is the belief that growthpromoting economic policies require certain types of domestic political institutions analysts have emphasized the utility of strong states in this regard 2 through an analysis of efforts to promote local auto manufacturing in southeast as well as east asia this article argues for an institutionalist approach to development that goes beyond statism the resolution of collective action problems is central to statist writings development requires that private returns to individual activities be brought in line with the broader needs of national development 3 two factors are presumed to obstruct such harmonization in developing

per capita public expenditures and population size a non parametric analysis using french data based on the median voter model we specify a flexible general framework of the effect of municipality size on per capita public expenditures previous literature has recognized that municipality size should have a non linear effect on the quality of public goods provision and to this end different papers have applied a range of alternative parametric specifications using a very large sample of french communes we are able to estimate the effect of municipality size semi parametrically in contrast with the parametric specifications we find evidence of the u shaped relationship between per capita public expenditures and population which is predicted by theory

local public goods and private suppliers musical suburbs replayed abstract this paper deals with the existence of private market suppliers in a standard local public goods model the result of this modification can be a cycling process instigated by rich households rather than poor households the theoretical model provides empirical implications for capitalization studies and policy implications for the provision and financing of local public goods including education