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

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

legislative district configurations and fiscal policy in american states in accordance with the median voter theorem the median legislator is decisive in representative democracy if the preferences of the median legislator differ from the preferences of the median voter in the polity fiscal policy choices will predictably diverge from those favored by the median voter this paper seeks to identify the median district and therein the preferences driving the median legislator in american state legislatures using economic characteristics of constituents we find substantial differences between the median district and the statewide median as the income of the median district rises above the median income of the polity government expenditures increase in addition the degree to which income is skewed across legislative districts affects spending for redistribution programs finally we find that direct democracy procedures which allow the statewide median voter to check legislative decisions limit the impact of differences between the district and polity medians

an examination of the structure of governance in california school districts before and after proposition 13 this paper explores the structure of governance in california school districts two alter native models are considered the decisive voter benevolent dictator model and a model that al lows for rent seeking behavior on the part of district decision makers a formal test between these two models is proposed and implemented the decisive voter model is found wanting as an expla nation of school district decision making both before and after the passage of proposition 13 there is however some evidence that the constraints imposed on some districts by proposition 13 have forced decision makers to act in a manner more consistent with the preferences of their constituents

secular cost changes and the size of government towards a generalized theory abstract baumol s cost disease account of government growth is contrasted with that of kau and rubin who focus on decreasing costs of tax collection over time the apparent paradox wherein the first theory explains government growth by cost increases and the second by way of cost decreases is technically resolved why both theories seem to be able to stand up to empirical tests even though they use similar data is then explained finally public choice analysis is employed to reveal further potential for the ultimate construction of one all embracing secular cost change theory of government growth

an econometric investigation of the monetary neutrality and rationality propositions from an international perspective t he combination of the natural rate of unemployment and the rational expectations hypotheses in macroeconomic models results in the now well known conclusion that anticipated short run monetary stabilization policies do not influence real economic variables this policy ineffectiveness proposition has been named the macro rational expectations mre hypothesis by modigliani 1977 as a result the implicit policy prescription is that a price level stabilization policy should be pursued the empirical validity of this conclusion is perhaps the central issue in modern stabilization theory barro 1977 1978 1981 barro and rush 1980 and leiderman 1980 have presented empirical evidence for the united states supporting this proposition however a number of recent studies have claimed that previous empirical results which support the finding that anticipated policy is neutral are flawed corrections of these problems often result in conflicting conclusions see small 1979 gordon 1979 and mishkin 1982 given the important implications of the mre hypothesis it is curious that almost all formal testing has been focused upon the united states while barro has suggested that a cross country study would be useful as far as we know only darby 1980 attempts to test whether anticipated changes in monetary policy are neutral across countries unfortunately his results suffer from problems caused by using generated regressors in addition he makes no attempt to test the individual implications of the mre hypothesis which encompasses the propositions that expectations are rational lad anticipated monetary policy does not matter in this paper we employ the methodology developed by mishkin to test the mre hypothesis in six countries canada germany italy japan the united kingdom and the united states the paper is divided into three major sections and a conclusion section ii briefly reviews mishkin s testing method in section iii the procedure employed to specify the money growth equation is discussed and these equations specified section iv presents and discusses the results of applying the method introduced in section ii in the conclusion the major findings are restated possible limitations discussed and extensions suggested

empirical evaluation of bureaucratic models of inefficiency two separate but related strands of literature exist regarding the efficiency of public sector service provision the theoretical base developed in the bureaucratic models of supply and the methodological base developed in the operations research and economic literatures most analyses focus exclusively on either the measurement or causes of inefficiency this paper seeks to empirically test bureaucratic models of supply by drawing on the measurement literature in anticipation of the results it is found that there does exist empirical evidence supporting some of the implications of these models

revolution evolution and local government structure an empirical analysis of london conventional analyses of local government structure focus on the revolutionary changes that result from deliberate reorganisations we propose a new perspective on structural change that emphasises the importance of evolutionary processes as well as radical reforms evolutionary changes in structure are caused for example by population growth or decline and reallocations of service responsibilities between tiers the argument is illustrated by an empirical analysis of fragmentation and concentration in the structure of local government in london the evidence reveals that structural change is the norm rather than the exception it occurs even when the absolute number of local government tiers and units is constant

endogenizing the median voter public choice goes to school this paper investigates implications of the relationship between voter self selection and the behavior of politicians voter self selection arises in elections because only a portion of eligible voters actually vote it is likely to be more pronounced whenever the implied net benefits from a given electoral choice are disproportionately distributed across voters public choice theory predicts that incumbent officials will manipulate this self election pursuant to the maximization of their personal objective functions this paper provides evidence from school bond elections that politicians influence voter self selection via manipulation of election parameters

the changing public role in agricultural extension abstract the public sector extension services in which governments of less developed countries ldcs have invested large sums often at the behest of donors are achieving uneven impact often at unsustainably high costs further the fundamental premise of public sector extension that low income farmers are unlikely to obtain technical information unless it is provided by government increasingly requires re examination this paper reviews the pressures facing conventional agricultural extension examines the prospects of recent approaches that are participatory institutionally pluralistic and geared towards cost sharing and suggests ways forward for governments

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

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

evaluating the impact of agricultural extension on farms performance in crete a nonneutral stochastic frontier approach this article attempts to integrate the production and the efficiency based approaches for evaluating the impact of extension on farms performance for this purpose the nonneutral production frontier model is used and the empirical analysis refers to a sample of farms from crete greece the empirical results support the proposed formulation instead of either the production or the efficiency based formulations as extension was found to have a statistically significant effect on closing both the technology and management gaps public and private extension services were found to be competitive in the production function and complementary in the technical inefficiency effect function in addition farms using both public and private extension services achieved a higher degree of technical efficiency than those using either public or private extension services and farms with no extension services were found to be the least efficient

the implications of competition among jurisdictions does tiebout need politics the paper investigates whether compensation among local jurisdiction is by itself sufficient to ensure efficient provision of local public goods jurisdictions have fixed boundaries and each has an entrenched government with the power to tax and supply the public good residents can move costlessly among jurisdictions it is shown that competition among numerous jurisdictions is not sificient to guarantee public sector efficiency though residents can vote with their feet land is immobile hence governments can unsurp some land rents for their own ends increasing the number of jurisdictions limits but cannot completely eliminate the ability to exercise discretionary governmental power

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

a disequilibrium model of public spending abstract this paper proposes a disequilibrium model of public spending empirical results show that public spending is constrained by the supply side for low per capita income countries and the demand side forhigh income countries

restructuring agricultural economics extension to meet changing needs the evidence is increasing that cooperative extension if not the agriculture component of the land grant university system itself may be unraveling the director of the office of management and budget has recommended that federal funding for extension be eliminated three fellows of the aaea suggest that if the land grant system were reformulated today there would be no extension component a past president of the aaea argues that the whole land grant university system has lost its sense of mission schuh to many these positions defy logic ignore the contribution that extension has made to

realigning research and extension to focus on farmers constraints and opportunities this paper argues that research and extension have failed to 1 develop technologies that take into account farmers resource constraints and risks and 2 improve farmers capacity to adapt technologies to their own situations the paper critiques continued use of blanket high dose fertilizer recommendations arguing for approaches that teach farmers how to maximize returns from smaller more affordable input purchases developingsuch technologies requires that researchers integrate a wider range of stakeholders farmers extension agents agricultural exporters and processors into research activities at an earlier point in time than has been the case although evidence that these new approaches are increasing the use of purchased inputs remains weak a number of important lessons are emerging about how research and extension outcomes are influenced by institutional culture and incentives the authors conclude that developingrecommendations for small affordable input doses and trainingfarmers so they can adapt recommendations to their particular circumstances is as much an institutional challenge as a technology challenge 2003 elsevier ltd all rights reserved

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

conservative dichotomous choice responses in the active policy setting dc rejections below wtp an important feature of a contingent value cv study is that researchers design a survey that guides respondents to answer dichotomous choice dc questions as if they represent once and for all choices researchers frequently construct hypothetical markets to satisfy this condition yet detractors assert that hypotheticality leads inevitably to inflated dc responses for active policy questions however some respondents may suspect that a cv informs an actual policy issue so to reject a dc might induce the policy maker to reintroduce the policy with a price reduction or a program improvement with potential incentives to deflate a dc response when policies are active we locate two types of respondents that represent two different incentives one class is expected to be able to risk permanent rejection of a waiver from one automobile emissions inspection this class more frequently rejects a dc value known to improve existing conditions another respondent class is expected to be risk averse to defeat of the program or to excessive delay predictably these respondents more frequently accept a dc value that represents a known gain conservative dc responses have implications for the use of cv in active policy contexts opening a role for theory to assist practitioners in these circumstances

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

off budget activities of local government comment bennett and dilorenzo have provided evidence that limitations on taxes and spending induce a proliferation of special purpose local government they conclude that the effects on spending were less than originally supposed whatever the effects on total spending a very important effect on the limitations is an induced change in the fiscal constitution of local government using a public choice approach this institutional change was found to have certain desirable features

evaluating the social optimality of durable public good provision using the housing price response to public investment recent empirical work in public finance uses the housing price response to public investment to assess the efficiency of local durable public good provision this paper explores the theoretical justification for this technique it points out that the logic justifying the technique for evaluating non durable public good provision does not translate to the durable case a model in which investment is determined by the interaction between a budget maximizing bureaucrat and a community s residents is used to demonstrate that the technique can falsely predict under provision falsely predict over provision or perform without error

public employment and the double role of bureaucrats bureaucrats in the government sector have a double role since they are both suppliers and demanders of public employment they are publicly employed supply labor and they have an important say in deciding the size of the municipal employment demand labor in this paper we present and estimate a theoretical model that focuses on this double role of bureaucrats the predictions from the theoretical model are supported by our empirical results the estimates based on data from swedish municipalities 1990 2002 show that wages have smaller effects on the demand for bureaucrats than on the demand for other types of public employees actually wages have no significant effect on the number of bureaucrats the municipality employs

bureaucrats voters and public investment abstract this paper explores the provision of a durable public good in romer and rosenthal s agenda setter model it identifies a type of equilibrium called a romer rosenthal equilibrium in which in every period the bureaucrat proposes the maximum level of public investment the voter will support the paper establishes that such an equilibrium exists for a variety of public good benefit functions equilibrium public good levels converge or almost converge to a steady state these steady states can involve a unique public good level being provided each period or may exhibit a two period cycle steady state public good levels exceed the voter s optimal level more surprisingly steady state equilibrium reversion levels can exceed the voter s optimal steady state level meaning that reversion levels cannot be used to bound the optimal level reflecting the inability of the agents to commit to their future proposing and voting behavior equilibrium paths are pareto inefficient

municipal utilities and local public finance a simultaneous model our results confirm the existence of a positive direct effect of cross subsidies from municipally owned water utilities on city spending while the results are consistent with the hypothesis that internal subsidization creates a fiscal illusion they are also consistent with vote maximizing behavior that is the demand for cross subsidies is found to depend on factors that reflect the city s fiscal position including its spending level in the absence of a contribution the results of the logit estimation suggest that annual contributions are discretionary and explained primarily by a city s fiscal health our results also confirm the existence of a simultaneous relationship between municipal spending and utility contributions and the need for a simultaneous estimation technique this bias affects all prior studies of the interaction between utility revenue contributions and local public finance variables and future studies must be aware of the simultaneous nature of the underlying relationship

the new public management and the reform of public services to agriculture in adjusting economies the role of contracting abstract this paper outlines the conditions under which contracting of different types succeeds in the provision of public services to agriculture it observes that performance contracting has been widely attempted in adjusting countries but generally with little success since it is demanding of resources flexibility and motivation in government under conditions where these are scarce examples are drawn from agricultural marketing given the largely private nature of the services to agriculture currently provided by the state the long term reform strategy should be market development contracting out and management contracting may have a role in this strategy particularly in better managed adjusting economies

running against the status quo institutions for direct democracy referenda and allocations over time stylized institutions for direct democracy referenda are examined in a dynamic full information environment with myopic voters competitive agenda median voter processes are contrasted with monopolistic controlled agenda processes by extending existing static analyses to a class of dynamic institutions not previously characterized the status quo reversion rule this highlights the dependence of the progression of real equilibrium allocations over time on institutional structure by delineating the restrictions implied by each institutional form the model explains some persistent empirical regularities in particular a strict ceteris paribus ordering of the magnitudes of budgets by institutional form is derived for a wide portion of the parameter space

demand supply and willingness to pay for extension services in an emerging market setting although it may be wholly inappropriate to generalize the most important resource available to a subsistence household is the total amount of time that its members have available to spend in productive enterprises in this context services that minimize the time that it takes to perform productive activities are valuable to the household consequently the household is willing to relinquish quantities of other resources in exchange for quantities of the time saving service these simple observations motivate a search for the values that subsistence households place on time saving services this search is especially important when it is realized that extension services promote productivity enhance the surplus generating potential of the household and can as a consequence promote immersion into markets that are currently constrained by thinness and instability in this capacity extension visitation has the potential to overcome one of the principal impediments to economic development namely lack of density of market participation in this article we consider this issue in the context of a rich data set on milk market participation by small holder dairy producers in the ethiopian highlands

the flypaper effect and competition in the local market for public goods in this paper we explore how the ability of bureaucrats to extract resources from their community may be limited by competition in the local market for public goods specifically we examine intergovernmental aid as a resource bureaucrats seek to control intergovernmental aid has been found to be more stimulative of local government expenditures than predicted by neo classical economic theory in this research the flypaper effect is used as an indicator of the ability of bureaucrats to control local resources in excess of local demand and preferences we empirically relate variation in the flypaper effect to the extent of competition in the local market for public goods competition does not consistently limit the flypaper effect the implications of this finding for theories of competition in the local market for public goods are then discussed

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

modeling government behavior in collective bargaining a test for self interested bureaucrats this paper tests for self interested behavior by local government bureaucrats engaged in collective bargaining with public employee unions a theoretical model is developed that shows the effect of niskanen style bureaucratic self interest in the two standard bargaining models the demand constrained model and the efficient bargain model these predictions are then tested using national cross section data on unionized police fire and sanitation workers

the median voter setters and non repeated construction bond issues the median voter model pervades the literature concerning the estimation of demands for collective expenditures but with some unanswered criticism the general issue addressed in this paper is whether observed collective expenditure levels and the characteristics of observed majorities are more adequately described by the median voter model or the romer and rosenthal setter model on a sample of non repeated hospital construction referenda bond issues the median voter model and the romer and rosenthal setter model are compared in both full information and uncertainty contexts little empirical support of the setter model is found indeed the evidence supports the absence of expenditure maximizing behavior the specific conclusions are 1 the standard median voter model explains quite well for this sample of non repeated bond issues 2 the explanatory power of the median voter model appears to vary across both voting arrangements and types of reversion threats 3 the explanation of hospital expenditures which have been judged too large may be due to how benefits and costs are distributed among voters and 4 the preponderance of large majorities for hospital construction in the face of evidence that such facilities typically become a burden on the general tax fund is consistent with setters offering the median ideal in the presence of a reversion below the ideal

the value of school facility investments evidence from a dynamic regression discontinuity design author s cellini stephanie riegg ferreira fernando rothstein jesse abstract despite extensive public infrastructure spending surprisingly little is known about its economic return in this paper we estimate the value of school facility investments using housing markets standard models of local public goods imply that school districts should spend up to the point where marginal increases would have zero effect on local housing prices our research design isolates exogenous variation in investments by comparing school districts where referenda on bond issues targeted to fund capital expenditures passed and failed by narrow margins we extend this traditional regression discontinuity approach to identify the dynamic treatment effects of bond authorization on local housing prices student achievement and district composition our results indicate that california school districts underinvest in school facilities passing a referendum causes immediate sizable increases in home prices implying a willingness to pay on the part of marginal homebuyers of 1 50 or more for each 1 of capital spending these effects do not appear to be driven by changes in the income or racial composition of homeowners and the impact on test scores appears to explain only a small portion of the total housing price effect c 2010 by the president and fellows of harvard college and the massachusetts institute of technology

does restricting choice in referenda enable governments to spend more if school boards represent the preferences of the median voter referendums to approve school expenditures should not constrain school expenditures if school boards would choose expenditures larger than the median voter s preference referendums that restrict voters to approving or disapproving a school board s recommended expenditure level will result in expenditures larger than the median voter would prefer however florida used a unique referendum system which guaranteed the median voter s most preferred outcome using florida education expenditures as a benchmark the evidence suggests that spending was slightly higher in restricted choice referendum states than in florida

the market for laws an economic analysis of legislation considerable insight into the workings of government has been gained in recent years by analyzing political behavior in the same way that economists analyze market behavior such analysis has led to at least two actually several distinguishable but often overlapping developments one might be labeled the interest group theory of government 1 4 10 11 12 16 while the second could be referred to as the economic theory of legislatures 4 5 10 15 18 the purpose of the following presentation is to combine these two theoretical developments and treat the legislative process as a market for laws then by simultaneously considering interest group characteristics and legislative production costs hypotheses concerning both the level of interest group pressure and the magnitude of legislative output are examined in particular the primary issues to be addressed are 1 what determines the number of interest groups formed in a state and 2 what impact does the number of interest groups have on the level of legislative output in the process the developing economic approach to government is extended in two directions first this study contains what appears to be the first direct empirical examination of the question of what factors lead to or limit aggregate interest group demands for legislation and second the level of interest group pressure and the constraints on or costs of legislative decision making are considered to simultaneously determine the aggregate output of the legislative process virtually all previous studies of interest group legislation examine the impact of specific interests on specific legislation 2 the following presentation is divided into five sections in addition to this introduction in order to explore the issues suggested above section ii characterizes the political process as a market in order to justify the theoretical hypotheses to be tested section iii details the theoretical

matching demand and supply in the agricultural knowledge infrastructure experiences with innovation intermediaries abstract the privatization of agricultural research and extension establishments worldwide has led to the development of a market for services designed to support agricultural innovation however due to market and systemic failures both supply side and demand side parties in this market have experienced constraints in effecting transactions and establishing the necessary relationships to engage in demand driven innovation processes to mitigate these constraints a field of intermediary organizations has emerged to assist agricultural entrepreneurs to articulate demand forge linkages with those that can provide innovation support services and manage innovation processes this article aims to give an overview of the different kinds of the so called innovation intermediaries that have emerged in the netherlands and to report on their contributions and the tensions that are being experienced with regard to their functioning the article concludes with a discussion in which it is argued that the state should play a role as a market facilitator by funding such innovation intermediaries

the demand for military expenditures an international comparison earlier studies have explained inter country variations in the share of gnp devoted to military expenditures by international spillovers and by differences in the threat of attack related to relative incomes in this paper we use the theory of public choice to explain these differences we attempt to measure the importance of both international spillovers and relative incomes along with two other factors the tax price elasticity of demand and economies of scale in the consumption of security we find that international spillovers are significant and positive that the income elasticity of demand is greater than unity that the tax price elasticity of demand explains part of observed inter country differences and that there are considerable economies of scale in the consumption of military spending finally between 1960 and 1975 there was apparently a substantial increase in the value which each country derived from a dollar of military spending by its allies this phenomenon which seems related to the increased importance of deterrent weapons has tended to induce individual alliance members to reduce the share of their national income devoted to defense

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

fragmentation and the growth of local government an assumption of the post world war ii metropolitan reform movement was that fragmentation of metropolitan regions into multiple local governments was wasteful and inefficient increasing the cost and size of government more recently polycentrists have argued that the competition between multiple governments in metropolitan regions can in factreduce the growth in government by providing a competitive check on the excessive demands of local bureaucrats for more resources in this article i explore the effects of fragmentation on growth in the size of suburban municipal government budgets and in the number of services offered competition inherent in more fragmented metropolitan regions is shown to slow the expansion in local government expenditures and service levels

the convergence of fiscal regimes and the decline of the tiebout effect i have argued that the spatial convergence of per capita incomes and income distributions lead to the spatial convergence of fiscal regimes and that convergence diminishes opportunities for tiebout type moves in the economy considerable empirical evidence confirms the hypothesis states with relatively low initial levels of taxation have had relatively higher growth rates of taxation low per capita income states have had higher growth rates of real per capita incomes than have had high per capita income states the high economic growth rate states have had lower growth rates of taxation than the low income growth rate states spatial convergence of per capita incomes is associated with spatial convergence of fiscal regimes furthermore there has been a spatial convergence in income distributions increased equality of income empirically is associated with increased size of the fiscal regime confirming the public choice insight the spatial convergence of fiscal regimes has diminished the gains from tiebout type moves as such fiscal convergence diminishes the opportunity for citizen voters to reveal their preference for collective goods through migration of course at the limit where per capita incomes and the income distribution are invariant spatially the spatial convergence of fiscal regimes makes the musgrave samuelson problem of revealed preference for collective goods as intractable at the state and local levels as at the national level tiebout type moves no longer allow escape from leviathan

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

asymmetric information and agenda control the bases of monopoly power in public spending abstract a pervasive empirical finding widely known as the flypaper effect is that lump sum intergovernmental grants generate considerably greater public spending by the recipient jurisdiction than would be predicted by equivalent shifts in personal income in that jurisdiction moreover such observations are inconsistent with standard median voter models of the political process we posit a model in which it is in the interest of suppliers of a collectively provided good not to generate full information to voters about outside aid the empirical results are consistent with flypaper and suggest that voters are very poorly informed about outside grants

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

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

the median voter model in public choice theory the changing perception by public choice theorists about the relevance of the median voter model is a result of excessive extrapolation of the conclusions of theoretical models to the real world early in the 1970s the median voter model was often accepted as implying that the output produced in the public sector was what was most preferred by the median voter this claim is excessive because the median voter model is only a model of demand aggregation under majority rule and has little to say about the supply side of the public sector in the late 1970s many scholars identified several circumstances under which the model would not apply in theory but these critiques of the model were often viewed as reasons to abandon the median voter model altogether the model went from having excessive claims that made the model appear to be more powerful than it really is to excessive claims that made the model appear to be less powerful than it really is these latter claims were often in response to the earlier claims rather than to the model appropriately applied

aggregate output capital and labor in the post war u s economy abstract new estimates of an aggregate long term production function for the post war u s economy are reported the results indicate that this long term aggregate production function exhibits a slight but statistically significant increasing returns to scale since virtually all econometric growth studies assume constant returns to scale my finding raises serious doubts about the validity of this common practice i also find that since the war real output has become more sensitive to changes in capital and less sensitive to changes in labor in particular i show that the long run capital and labor elasticities of real output are both in the range of 0 44 0 55 similar estimates for the capital and labor elasticities of output from earlier studies covering pre war and the inter war periods are 0 25 and 0 75 respectively

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

learning the preferences of governments and voters from proposed spending and aggregated votes abstract remarkably little is known about how to analyze the proposals and voting results from spending referenda when the votes are aggregated by jurisdiction and the proposals are different across jurisdictions this paper presents a framework in which we can derive the voting equation comparative statics and links between reduced form and structural parameters that are implied by different models of the proposal maker it is then possible to use interjurisdictional proposal and voting information to test hypotheses about the proposal maker and the voters our empirical work finds support for a modified budget maximization model over simpler maximization models and various non maximization models

privatization of agricultural extension services in the eu towards a lack of adequate knowledge for small scale farms small scale farming involves millions of households in the eu and plays an important role in the rural economy a significant percentage of these farms produce commodities for the market this productive dimension is often overlooked however as is the technical support needed by these farms the privatization of national farm advisory systems nfas has an impact on small scale farming that should be better assessed this paper which looks at the characteristics of intangible services helps demonstrate how the privatization of advisory services may have unexpected adverse effects on small farms the dismantling of coordinating authorities has made these farms less visible as a target client less direct interaction with advisors makes it more difficult to co produce knowledge that is relevant to their needs in addition back office activities such as scientific monitoring building and updating databases and scientific experiments have been restructured in a way which does not support their interests

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

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

centralization and government competition this paper examines the relationship between government size and fiscal centralization with specific focus on the separate influences of centralism and fragmentation on the size of public sector in the united states the empirical findings at the national level provide support to the hypothesis that fiscal decentralization leads to a smaller government the findings at the state and local levels however show no empirical relationship between government size and the degree of centralization

economic incentives under contract supply of local government services it has been argued that organizations which are unable to directly appropriate any of the firm s residual earnings tend to experience various forms of wealth taking by managers alchian and kessel 1962 this wealth taking has been observed in privately owned regulated firms nelson 1980 as well as in government operated bureaus the results in this paper suggest that the x inefficiency associated with various forms of wealth taking may be constrained when external competitive pressures exist niskanen argued that one strategy for reducing the inefficiency associated with monopoly bureaus would be to set up two bureaus to compete for the sponsor s budget in order to generate better information on cost and production functions at the local level the lakewood plan by generating information on actual production cost to purchasing cities and to unincorporated area residents appears to create the desired effect by generating this flow of information on cost the lakewood plan eases the task of monitoring the performance of county departments second the threat of entry posed by the city bureau which can always produce services in house appears to effectively constrain the x inefficiency of the county supplier bureaus

can the small dairy farm remain competitive in us agriculture smaller dairy farms in the us are observed to have higher costs than larger farms and whether those higher costs are due to technology or inefficiency has implications for policy to address the small farm if high cost of production on smaller farms is due to a higher cost frontier then to make small farms competitive would require research to devise and design technology that is suitable for small farms if instead high cost is due to inefficiency then educational approaches are needed to ensure small dairy farms use technology efficiently to determine the cause of higher costs on small farms the cost of milk production by farm size was decomposed into frontier and efficiency components with a stochastic cost curve using data on usa dairy farms although the frontier cost of production decreases with farm size that cost reduction is not as pronounced as a cost curve that includes inefficiency the higher cost of production on many smaller farms is caused by inefficiency rather than technology

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

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

establishing the micro foundations of a macro theory information movers and the competitive local market for public goods e tiebout model of competition in the local market for public goods is an important and controversial theory the current debate revolves around the apparent disparity between macro 5 x empirical studies that show greater efficiency in the supply of public goods in polycentric regions compared to consolidated ones and micro evidence of widespread citizen consumer ignorance which has been used to argue that individual actions cannot plausibly lead to efficiency enhancing competition between local governments we argue that competitive markets can be driven by a subset of informed consumers who shop around between alternate suppliers and produce pressure for competitive outcomes from which all consumers benefit using data from a survey of overfive hundred households we analyze the role of these marginal citizen consumers and incorporate the costs of information gathering and the strategic interests of local governments into the competitive market model

estimating the publicness of local government services alternative congestion function specifications the standard approach to estimating median voter expenditure equations has incorporated the specification of a congestion function a n to convert the total output q of a government provided good into individual consumption qi in their classic papers borcherding and deacon 2 and bergstrom and goodman 1 adopted a simple form a n n y using this form estimated values of y 0 imply that the service in question is classified as a pure public good while y 1 implies a private good this approach is attractive from an empirical standpoint because it allows the data to determine the degree of publicness of the local government output the empirical findings of borcherding and deacon bergstrom and goodman and numerous later studies that used the median voter approach indicate that most local government services do not exhibit a significant degree of publicness 2 recent studies have questioned whether estimates of publicness are sensitive to the particular specification of the congestion relationship 6 9 researchers also have objected to the standard form because it holds the degree of publicness fixed which implies a decreasing marginal rate of congestion 3 6 15 moreover holding the degree of publicness fixed implies a single estimated value of y is sufficient to classify the publicness of the good critics of the standard approach argue that the degree of publicness should vary with population size for instance a local park may exhibit no congestion for small population sizes but eventually become congested as population increases unfortunately no clear guidelines for specifying the congestion function are available edwards suggested that flexible functional forms are to be preferred because they let the data speak for themselves 6 92 he also argued that the preferred form is one that fits the data best based on these criteria he concluded that a flexible form such as an exponential form is su

median voters political systems and public policies an empirical test this paper tests the median voter hypothesis that variations in policies across political systems are caused by variations in median voter preferences the context of the empirical analysis is the tax policies of three groups of sub national governments in england in three time periods the results of a median voter model of tax policy variation are compared to the results of a mean voter model in different party systems and different electoral systems the evidence provides little support for the median voter hypothesis

tax policy and economic growth lessons from the 1980s the past seven years of u s economic policy and performance constitute a truly remarkable if confusing experiment few would have guessed in 1980 that inflation would fall rapidly to 4 percent and hold pretty steady during a lengthy recovery that productivity growth would partially rebound the national debt more than double capital imports reach 150 billion in a single year or that employment would continue to expand at rates envied by other advanced economies perhaps fewer still would have predicted two major and two minor tax reforms would be passed in six years a flip flop in depreciation schedules and a top personal tax rate below 30 percent while it is always easier to draw inferences concerning economic growth its determinants and policies affecting the determinants with long historical hindsight this paper will attempt to provide information evaluation and conjecture to draw some tentative lessons about the effects of tax policies in the 1980s on long run economic growth the good news from the 1980s is the remarkable achievement of substantially lower marginal tax rates making the government a much smaller silent partner in many economic decisions for example the tax advantage of debt finance is reduced substantially with the much lower marginal tax rates the bad news is that the nation could not afford all of the good news the very large budget deficits add to the instability in the tax code in addition to whatever other problems they cause moreover in a country with the lowest saving and investment rates in the advanced world the consequence of which may be to decrease our long run growth potential and short run trade competitiveness the remaining anti saving and investment features of our tax law while probably less important in the long run than the u s

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

output capital and labor in the short and long run using a new series of capital stock and frequency domain analysis this paper provides new empirical evidence on the relative importance of capital and labor in the determination of output in the short and long run contrary to the common practice in the traditional growth accounting literature of assigning weights of 0 3 and 0 7 to capital and labor inputs respectively the evidence presented here suggests that capital is a far more important factor than labor for determination of output at and near the zero frequency band furthermore i show that the zero frequency labor elasticity of output may well be close to zero or even zero additional findings reported here support the traditional accelerator model of investment as a good description of the long run investment process

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

extension commercialization how much to charge for extension services as public agricultural extension organizations around the world examine the possibility of privatizing or commercializing part or all their services several issues arise in this paper i address the question of how to price the services provided using available data from israel a supply marginal cost function is estimated for the israel extension service and a demand function for extension services is estimated the derived number of visits and the per visit price are calculated several general extension related policy issues that may also be applicable to other countries are discussed