local government structure and public expenditures the law of 1 n postulates a positive relationship betweenthe number of democratically electedrepresentative districts and governmentspending strong support for thisrelationship exists in legislatures in theunited states at both the state andnational level and across countries fewstudies have examined this relationship atthe local level despite the fact that localgovernments operate under constraintssimilar to those faced by representativelegislatures using a sample of georgiacounties we find the number of countycommissioners to be positively correlatedwith county government expenditures indicating support for the law of 1 nat the local level

the local response to tax limitation measures do local governments manipulate voters to increase revenues abstract this paper provides evidence that some cities subject to a statewide tax limit manipulate their mix of productive and administrative services in an attempt to get voters to override the statewide limit when a statewide limit reduces a city s budget one manipulative response is to cut service inputs for example teachers or uniformed police officers by a relatively large amount while cutting administrative inputs by a relatively small amount this approach reveals a relatively large trade off between public and private goods and the severe consequences from a tax limit may encourage local voters to override the statewide limit we provide evidence that cities with local override options tend to adopt this approach manipulation is most prevalent among cities run by city managers as opposed to strong mayors

districting and government overspending theories of government spending driven by a common pool problem in the fiscal revenues pool predict that greater districting of a political jurisdiction raises the scale of government this paper presents evidence on this and related predictions from a cross section of city governments in the united states the main finding is that when other plausible determinants of government spending are controlled for greater districting leads to a considerably greater scale of government activity the results also show that at large electoral systems do not and forms of government that concentrate powers in the office of the executive do break this relationship

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

us regionalism and rationality regionalism continues to be proffered as a policy prescription for us metropolitan ills while many urban scholars discuss the benefits of regional approaches to problem solving others question and sometimes dismiss the possibility of widespread comprehensive regionalism this latter group generally takes one of two perspectives first they argue that local autonomy and fragmentation prohibit regional collaboration secondly rational choice theorists claim jurisdiction centred economic interest spurs intraregional competition and impedes cooperation although both perspectives can be criticised as overdeterministic they appear to be supported by the limited number of examples of comprehensive metropolitan co operation in the us this article identifies a theoretical connection and empirical similarity between these views of impediments to regionalism the author argues that strategies suggested by rational based collective action theory apply to either the autonomy or competition argument however

is there a leviathan in your neighborhood this paper measures effects of decentralization in local government hierarchies on local public sector size this sector shrinks if decentralization encourages competition among governments it expands if decentralization sacrifices scale economies in a sample of 3 022 counties larger county governments reduce competition and increase aggregate local public sector size relative to aggregate county income more cities and towns increase competition and reduce its size more special and school districts sacrifice scale economies and increase it two recent articles have attempted to identify the effects of decentralization in state and local government on the size of the state and local public sector wallace oates 1985 finds no important effects michael nelson 1987 finds modest evidence that increased competition among government units reduces the size of the public sector this article demonstrates that the effects of decentralization are important and complex decentralization which encourages competition reduces the size of the local public sector decentralization which discourages scale economies increases it

economies of scale and input substitution in public libraries abstract a translog cost function is applied to 1988 data for 194 indiana public libraries to measure economies of scale and input substitution elasticities book circulation measures library output and costs include noncapital expenditures scale economies exist for libraries with circulations up to 55 000 per year larger libraries exhibit constant returns to scale labor books and supplies services are all substitutes with inelastic own price and cross price elasticities

does tax competition tame the leviathan abstract we study the impact of tax competition on equilibrium taxes and welfare focusing on the jurisdictional fragmentation of federations in a representative agent model of fiscal federalism fragmentation among jurisdictions with benevolent tax setting authorities unambiguously reduces welfare if however tax setting authorities pursue revenue maximization fragmentation by pushing down equilibrium tax rates may under certain conditions increase citizen welfare we exploit the highly decentralized and heterogeneous swiss fiscal system as a laboratory for the estimation of these effects while for purely direct democratic jurisdictions which we associate with relatively benevolent tax setting we find that tax rates increase in fragmentation fragmentation has a moderating effect on the tax rates of jurisdictions with some degree of delegated government our results thereby support the view that tax competition can be second best welfare improving by constraining the scope for public sector revenue maximization

supermajority rule the law of 1 n and government spending a synthesis i develop models in which a minimum winning coalition decides on the level of government spending where the coase theorem holds amongst members of the winning coalition an increase in the supermajority requirement has potentially conflicting effects on spending a higher requirement increases the tax price internalized by the minimum winning coalition but also increases the number of districts included in this coalition i develop separate models in which the spending in question consists of i a nonexcludable good ii a distributive consumption good iii infrastructure spending and iv a transfer payment a supermajority rule has no effect on spending for nonexcludable goods and ambiguous effects on spending for distributive projects and infrastructure spending an increased supermajority requirement does unambiguously reduce transfer spending i also relate the supermajority rule to the law of 1 n if the coase theorem holds and a minimum winning coalition forms an increase in the number of districts n has precisely the same effect on overall expenditure as a decrease in the supermajority requirement thus the ambiguous spending effects stemming from supermajority rule carry over into this version of the law of 1 n

local intergovernmental competition and the law of 1 n this article proposes an empirical framework based on a synthesis of the seminal law of 1 n and leviathan theories which models the relationship between government spending and the number of jurisdictions in a federal system as determined by the interplay of the costs related to centralized government which fall as the number of jurisdictions increases and the costs of distributive politics which rise as the number of jurisdictions increases using a panel of u s state and local government spending data empirical tests based on this combined framework show that the effect of intergovernmental competition predicted by the leviathan model is partially offset by the law of 1 n this result helps explain the inconsistent findings in the previous empirical literature

state government expenditure determinants and tax revenue determinants revisited the primary aim of the research was to test the general hypothesis that many institutional and political variables affect fiscal outcomes that the preferences of public officials and the decision processes used to act on those preferences matter state government data state only not state and local from 1980 1985 and 1990 were used to specify state tax revenue and expenditure models a previous merrifield 1991 state tax revenue model identified many significant institutional and political variables but it was based only on 1985 data 49 observations the larger data set 147 observations including better data for some of the variables indicated that most of merrifield s 1991 findings are robust the state expenditure models facilitated a second test of the general institutional and political variable hypothesis as well as the hypotheses about specific variables the expenditure model also facilitated comparisons of expenditure and tax determinants and comparisons with results published in the literature though there are some noteworthy differences between the expenditure and tax models the expenditure models also supported many of the institutional and political variable hypotheses

standing tiebout on his head tax capitalization and the monopoly power of local governments much of the public finance literature argues that localgovernments behave competitively due to residents ease of exitand entry the model presented here challenges this widespreadconclusion though it is costless to relocate to anotherlocality the presence of tax capitalization makes it impossiblefor land owners to avoid monopolistic pricing of public servicesby moving land owners can only choose between paying the taxdirectly or paying it indirectly in the form of a lower sale valuefor their housing if they exit in consequence the only realcheck on local governments comes through imperfectly functioningelectoral channels

the institutional and political factors which influence taxation the ability of politicians to concentrate the benefits of spending while dispersing the costs of taxation makes taxation attractive distributive politics but the degree to which it is attractive varies widely among the states the objective of the research was to develop a fully specified model of per capita tax revenues of state governments not state plus local and thereby identify the political and institutional factors which cause the attractiveness of taxation to vary the resulting model includes 17 significant explanatory variables which together account for all but 10 of the variation in per capita tax revenue thirteen of the significant variables are institutional or political factors thus providing decisionmakers specific options for influencing the future size of government

the law of 1 n revisited distributive politics legislature size and the costs of collective action the foundational model of distributive politics predicts a positive relationship between the number of legislative districts and the level of inefficiency of projects approved by the legislature weingast shepsle and johnsen s law of 1 n this relationship has been tested extensively in the empirical literature with mixed results this article presents a model wherein passing the omnibus legislation typical of distributive politics is a costly process the model predicts a nonlinear relationship between legislature size and spending as increasing the size of the legislature also increases the costs of collective action results from an empirical exercise based on u s state legislatures 1962 2014 are consistent with the proposed model showing a 1 n effect which diminishes at the margin as the legislature s size increases especially in the lower chamber

political institutions and sorting in a tiebout model we construct a computational model of tiebout competition and show that political institutions differ in their ability to sort citizens effectively in particular we find that certain types of institutions those that become more politically unstable as citizen heterogeneity increases perform relatively poorly given a single jurisdiction yet these same institutions perform relatively well when there are multiple jurisdictions we provide an explanation for this phenomenon which draws upon simulated annealing a discrete nonlinear search algorithm jel

fiscal decentralization and government size numerous studies have attempted to model the possible factors contributing to universal growth in public sectors this paper analyzes one device that appears capable of controlling some of that growth fiscal decentralization the results reported here also support the use of monopoly government assumptions in models of public policy

leviathan and fiscal illusion in local government overlapping jurisdictions this paper integrates twomodels of local government behavior leviathan and fiscal illusion into theframework of overlapping jurisdictions estimation of the leviathan and fiscalillusion variables without accounting forvertical effects between overlappingjurisdictions results in overestimation ofthe horizontal effects using a medianvoter model and municipal and county datawe find support for the leviathan modelusing traditional tests these effects arelargely offset however when the test isset within the context of the verticalrelationship we find that municipal percapita expenditures and county per capitaexpenditures are symmetricallycomplementary

early evidence of the impacts of covid 19 on minority unemployment this paper provides early evidence of the impacts of the covid 19 pandemic on minority unemployment in the united states in the first month following march adoptions of social distancing measures by states unemployment rose to 14 5 but a much higher 24 4 when we correct for potential data misclassification noted by the bls using the official definition unemployment in april 2020 among african americans rose by less than what would have been anticipated to 16 6 based on previous recessions and the long term ordering of unemployment across racial ethnic groups was altered with latinx unemployment 18 2 rising for the first time to the highest among major groups difference in difference estimates confirm that the initial gap in unemployment between whites and blacks in april was not different than in periods prior to the pandemic however the racial gap expanded as unemployment for whites declined in the next two months but was largely stagnant for blacks the initially large gap in unemployment between whites and latinx in april was sustained in may and june as unemployment declined similarly for both groups non linear decompositions show a favorable industry distribution partly protected black employment during the early stages of the pandemic but that an unfavorable occupational distribution and lower average skills levels placed them at higher risk of job losses an unfavorable occupational distribution and lower skills contributed to a sharply widened latinx white unemployment gap that moderated over time as rehiring occurred these findings of disproportionate impacts on minority unemployment raise important concerns regarding lost earnings and wealth and longer term consequences of the pandemic on racial inequality in the united states

the leviathan lottery testing the revenue maximization objective of state lotteries as evidence for leviathan unlike other governmental units statelottery agencies publicly acknowledge thattheir primary objective is revenuemaximization this claim and the inherentmonopoly power of lottery agencies providesa unique arena to test for leviathan withdata obtained from united states lotterygames i perform a laffer curve analysis toderive the optimal lottery tax rates fordifferent categories of games theseoptimal tax rates and monte carlosimulations are then used to test whetherthe current tax structure of lottery gamesis indeed the revenue maximizing structure i find strong empirical evidence for the leviathan lottery

welfare improving competition for mobile capital abstract this paper constructs a model in which regions provide firms with a public input financed by taxes that residents choose to levy on capital and wage income self interested government officials face incentives to provide the public input because its positive impact on labor and capital productivity leads to larger tax bases the positive relation between tax revenue and the public input is strengthened if capital is mobile across regions government officials engage in expenditure competition leaving residents better off than they would be in the absence of capital mobility to further enhance public sector incentives residents may choose to tax capital income at a positive rate although investment is discouraged

deciding to provide local decisions on providing social welfare fiscal federalism predicts local governments will avoid social welfare expenditures owing to capital mobility across local jurisdictions yet census of governments data consistently show that many local governments provide one or more social welfare functions and moreover many jurisdictions provide these functions without federal or state intergovernmental support this article finds evidence that while local expenditures are largely driven by fiscal capacity and federal and state assistance local decisions on providing social welfare functions and participating in intergovernmental revenues are primarily affected by degree of capital mobility and by local political factors consequently local governments exercise much greater autonomy over social welfare policymaking than fiscal federalism suggests

decentralized taxation and the size of government evidence from swiss state and local governments according to the leviathan model fiscal federalism is seen as a binding constraint on a revenue maximizing government the competitive pressure of fiscal federalism is supposed to reduce public sector size as compared to unitary states however empirical results concerning the leviathan hypothesis are mixed this study uses a state and local level panel data set of swiss cantons from 1980 to 1998 to empirically analyze the effect of different federalist institutions on the size and structure of government revenue because of the considerable tax autonomy of sub national swiss governments it is possible to investigate different mechanisms by which fiscal federalism may influence government size the results indicate that tax exporting has a revenue expanding effect whereas tax competition favors a smaller size of government fragmentation has essentially no effect on the size of government revenue for swiss cantons the overall effect of revenue decentralization leads to fewer tax revenue but higher user charges thus revenue decentralization favors a smaller size of government revenue and shifts government revenue from taxes to user charges

the law of k n the effect of chamber size on government spending in bicameral legislatures recent work in political economics has examined the positive relationship between legislative size and spending which weingast et al 1981 formalized as the law of 1 n however empirical tests of this theory have produced a pattern of divergent findings the positive relationship between seats and spending appears to hold consistently for unicameral legislatures and for upper chambers in bicameral legislatures but not for lower chambers we bridge this gap between theory and empirics by extending weingast et al s model to account for bicameralism in the context of a baron ferejohn bargaining game our comparative statics predict and empirical data from u s state legislatures corroborate that the size of the upper chamber n is a positive predictor of expenditure whereas the ratio of lower to upper chamber seats k exhibits a negative effect we refer to these relationships as the law of k n as the two variables influence spending in opposite directions

the size of the state economic growth and the efficient utilization of national resources the motives of the state in projecting a more than minimal presence in the economy may be conceived of as benevolent or malevolent whatever the characterization of the motivation increases in the size of the government share of the economy adversely affect economic growth and the allocation of resources nations with relatively large government shares in 1960 on the whole grew more slowly than nations with relatively small state sectors interperiod increases in the size of government were associated with lower growth rates over the period the size of the government share coefficients in the regressions were of sufficiently large magnitude to conclude that the rise in the size of the government has had a substantial depressing effect on economic growth these results are consistent with those reported by landau 1983 and marlow 1986 landau did not adjust economic growth for the growth in factor endowment consequently his results overstate the adverse effect of government size

government size and decentralization evidence from disaggregated data public choice models of government behavior draw heavily from the economics literature of industrial organization following the argument that private monopoly in production leads to relatively high prices and profits the public choice literature suggests that similar analysis of government structure may be useful in the modeling of public production brennan and buchanan 3 4 model government as leviathan a public entity which seeks to maximize its revenue the leviathan hypothesis is motivated by the desire to successfully understand government behavior as well as to recommend effective means of controlling its behavior among other suggestions brennan and buchanan offer the private monopoly corollary that competition among different fiscal units is an effective means of controlling the aggregate size of leviathan the resulting decentralization hypothesis is total government intrusion into the economy should be smaller ceteris paribus the greater the extent to which taxes and expenditures are decentralized 3 15 this paper tests the decentralization hypothesis by examining a data set which considers all units of government by disaggregating federal spending on a state by state basis we construct a cross section of state data on federal state and local government activity all previous examinations of the decentralization hypothesis at the level of the state have excluded the activity of the federal government however given that federal government expenditures greatly exceed those of state and local governments previous cross sectional tests of the decentralization hypothesis may have employed grossly incomplete measures of governmental activity in each state our study provides two extensions to the debate one by testing the decentralization hypothesis at the level of state aggregation we suggest that previous cross sectional studies do not report strong evidence in support of the hypothesis because of their exclusion of the federal sector two our study suggests the importance of including all potential competitors in the government arena state local and federal governments our study does not solve all issues concerning aggregation

leviathan in the crosshairs following in the spirit of the leviathan hypothesis this paper empirically examines how the degree of local government market power influences efficiency in the local public sector market power is measured by the number and relative size distribution of similar government units in the same market area to avoid confusing market power with the comparative efficiency or superiority of larger sized organizations the relative size distribution of the individual government unit is held constant in the empirical analysis in the empirical test aggregate property values serve as the measure of efficiency the empirical results suggest that aggregate property values are lower and thus efficiency suffers in more concentrated municipal market areas ceteris paribus thus providing some evidence for leviathan type governments in connecticut

the decline in the number of school districts in the u s 1950 1980 between 1950 and 1980 the number of school districts fell from 83 642 to 15 987 data for the fifty states for 1950 1960 1970 and 1980 are used to identify the factors that contributed to this decline the focus is on the tradeoff between cost savings through scale economies a few large districts and a diverse population s demand for choice in public schooling many small districts we find that much of the decline in the number of school districts has resulted from 1 the decline in the farm population and increase in population density which has made it easier to take advantage of scale economies 2 the growing importance of state aid which reduces quality variation among districts within a state and 3 the increase in the fraction of teachers that belong to the national education association teacher s union which may reflect increased political influence used to lower the costs of organizing

is there a bias toward excess in u s government budgets or deficits do the political institutions of a majoritarian representative democracy and in particular those of the united states systematically produce either levels of public spending or budget deficits that are excessive should u s political institutions be altered by constitutional amendment to deal with these problems i will start by examining the issue of public spending and then turn to the question of budget deficits

state mandates and interest group lobbying abstract we apply becker s 1983 model of political interest groups to state mandates on public expenditures and revenues of local governments we outline conditions under which interest groups increase localities output levels above the efficient level but political pressure at the state level will reduce spending toward the efficient level an implication of our model is that political lobbying at the local level occurs only because of its indirect effects on state mandated outcomes because the state ultimately decides the government service level interest groups payoffs to lobbying at the state level generally will exceed those at the local level

local decentralization and local economic growth a cross sectional examination of us metropolitan areas this paper builds on the growing empirical literature that explores the relationship between government structure and economic growth it uses a new data set of 314 us metropolitan areas to examine the relationship between local decentralization and local economic growth the results indicate a negative relationship between the central city share of metro area population and economic growth and a positive relationship between both the number of municipalities per 100 000 residents and the number of counties per 100 000 residents and economic growth those findings provide support for the hypothesis that decentralization enhances economic growth

districts diversity and fiscal biases evidence from the american states abstract this paper argues that the configuration of legislative districts and not merely the number of districts matters for fiscal performance district configuration mediates the extent of constituent diversity both across and within districts both dimensions of diversity affect the political calculus associated with pork barrel politics empirical findings for the american states reveal statistically and quantitatively significant effects of constituent diversity on state government spending together the analysis and evidence emphasize the conditional nature of the law of l n in the united states this point acquires practical relevance from the constitutional mandate for decennial redistricting in all jurisdictions based on geographic representation

examining the relationship between municipal consolidation and cost reduction an instrumental variable approach abstractthis study explores the cost reduction effects of local government consolidation using data from japanese municipalities we use municipal panel data from japan for the years 2000 2005 and 2010 a data set including numerous consolidation cases reverse causality between consolidation decisions and size of municipal expenditure is a concern in the voluntary consolidation of local governments an instrumental variable iv methodology is employed to deal with possible endogeneity associated with consolidation decisions the main finding is that municipal current expenditure per capita increases immediately after consolidation but then gradually declines because consolidation seems to increase per capita expenditure in the absence of the effect of this long term declining trend incorporating this trend into estimation is crucial in cost efficiency analysis of consolidation it is also shown that conventional panel data regressions yield biased consolidation effects suggesting the superiority o

strategic choices for renewable energy investment conceptual framework and opportunities for further research this paper introduces the special issue on strategic choices for renewable energy investment which is a collection of best papers presented at an international research conference held in st gallen switzerland in february 2010 substantial private investment is needed if public policy objectives to increase the share of renewable energy and prevent dangerous anthropogenic climate change are to be achieved the aim of this paper and the entire special issue is to draw scholarly attention to the processes underlying strategic choices for renewable energy investment and how they are influenced by energy policy we disentangle the role of risk return perceptions portfolio effects and path dependence in explaining energy investment decisions and suggest that the heterogeneous universe of investors requires a segmentation of policies the paper outlines some of the rich opportunities for further research in this emerging area

how many jobs can be done at home evaluating the economic impact of social distancing measures taken to arrest the spread of covid 19 raises a fundamental question about the modern economy how many jobs can be performed at home we classify the feasibility of working at home for all occupations and merge this classification with occupational employment counts we find that 37 of jobs in the united states can be performed entirely at home with significant variation across cities and industries these jobs typically pay more than jobs that cannot be done at home and account for 46 of all us wages applying our occupational classification to 85 other countries reveals that lower income economies have a lower share of jobs that can be done at home

rank stock order and epidemic effects in the diffusion of new process technologies an empirical model in this article we construct a general duration model of technology adoption that incorporates the main factors discussed in different theories of diffusion of new process technologies the model is applied to data on diffusion of cnc in the uk engineering industry although we find strong evidence in support of rank and endogenous learning effects there seems to be little evidence in support of the stock and order effects the main factors affecting the diffusion of cnc are found to be endogenous learning firm size industry growth rates the cost of the technology and expected changes in the cost of the technology

a positive model of tax structure the model of tax structure developed in this paper is one in which the composition of revenues and the structure of specific taxes arise naturally as the result of self interested political behavior it is assumed that political agents choose tax structure so as to minimize the political costs or expected net loss in votes associated with raising a budget of given size several hypotheses concerning the nature of political cost functions are developed and applied to an explanation of the differences among u s states in their reliance on income taxation the empirical application emphasizes differences in political constraints across jurisdictions in the belief that much can be learned about the choice of policy instruments by studying structural adjustments in response to varying constraints the paper discusses how the proposed approach differs from or is consistent with that adopted by other authors and how the estimating equation relates to other empirical research in the literature

federalism and the growth of government revisited recent research in public economics has been testing for a relationship in federal states between the decentralization of governments and the total and individual size of government shares in gnp according to one view economic theory offers no unambiguous empirical predictions provided there is a competitive political environment at each government level the rivalry between political parties will result in an outcome that conforms approximately to the preferences of the citizens as interpreted in the conventional median voter model under this scenario it is not certain what differences might be caused by more decentralization oates 1985 to determine any difference we would have to possess considerable knowledge about the distribution of tastes and the location of the populace it has been hypothesized nevertheless that increased decentralization could result in a higher level of government expenditure quoting the economic historian john wallis oates 1985 749 suggests that since individuals have more control over public decisions at the local than at the state or national level they will wish to empower the public sector with a wider range of functions and responsibility where these activities are carried out at more localizedlevels of government

how does fiscal decentralization affect aggregate national and subnational government size abstract beyond conducting the usual regression analysis of the relationship between fiscal decentralization and aggregate government size national and subnational combined this paper makes the first attempt to examine how different fiscal decentralization measures affect the sizes of national and subnational state and local combined governments an econometric analysis using panel data from 32 industrial and developing countries 1980 1994 finds that 1 expenditure decentralization leads to smaller national governments larger subnational governments and larger aggregate governments 2 revenue decentralization increases subnational governments by less than it reduces national governments hence leads to smaller aggregate governments and 3 vertical imbalance tends to increase the sizes of subnational national and aggregate governments

fiscal effects of reforming local constitutions recent german experiences most german states amended their local constitutions during the 1990s and now allow for the direct election of mayors initiatives and referendums and vote aggregation as well as vote splitting in this paper it is asked whether these reforms had any effects on local fiscal policies it is shown that the direct election of mayors led to lower government spending whereas the introduction of direct democratic elements led to higher expenditures the empirical results concerning direct democracy are substantially different from findings in relation to both switzerland and the us it is argued that this difference may be due to a lack of fiscal referendums in germany

who suffers during recessions in this paper we examine how business cycles affect labor market outcomes in the united states we conduct a detailed analysis of how cycles affect outcomes differentially across persons of differing age education race and gender and we compare the cyclical sensitivity during the great recession to that in the early 1980s recession we present raw tabulations and estimate a state panel data model that leverages variation across u s states in the timing and severity of business cycles we find that the impacts of the great recession are not uniform across demographic groups and have been felt most strongly for men black and hispanic workers youth and low education workers these dramatic differences in the cyclicality across demographic groups are remarkably stable across three decades of time and throughout recessionary periods and expansionary periods for the 2007 recession these differences are largely explained by differences in exposure to cycles across industry occupation employment

public education supply and student performance this paper develops a model of public exchange whereby voters and education policy makers exchange with one another within school districts because school district consolidation lowers alternatives to voters parents consolidation is hypothesized to raise public education spending because weakened intergovernmental competition allows policy makers to promote their own utility rather than that of constituents models of public education spending and academic performance are estimated over 1988 1990 while evidence indicates little support for the traditional treatment of the leviathan hypothesis that greater competition lowers public spending this paper argues that education spending by itself does not fully provide a valid test of the leviathan hypothesis since spending by itself does not necessarily indicate the quality of public education programmes empirical evidence indicates that greater numbers of schools and school districts promote higher student achievement as evidenced by higher math and v

searching for leviathan comment and extension in a recent article wallace oates 1985 investigated whether fiscal decentralization tended to act as a constraining influence on the overall size of the public sector this hypothesis has been advanced by several alternative theories of government behavior including richard musgrave s 1959 model of how the distribution function of government would be carried out by subnational governments geoffrey brennan and james buchanan s 1980 leviathan model and the more traditional public choice model for example walter hettich and stanley winer 1984 all contend that the decentralization of tax and spending decisions introduces competition among governmental units seeking to attract citizens and other mobile resources and thereby constrains taxing power oates analyzed two data sets one pertaining to the state and local sector in the united states and the other consisting of a sample of 43 countries and found little empirical support for the decentralization hypothesis the purpose of this paper is to reconsider his analysis in the case of state and local governments specifically it will be argued that oates s measures of decentralization may be inappropriate to test the hypothesis furthermore by taking into account the structure or composition of local governmental jurisdictions within a state empirical support of the decentralization hypothesis can be marshaled for general purpose local governments such as counties and municipalities i measuring fiscal decentralization among the states

vertical versus horizontal tax externalities an empirical test abstract we study taxation externalities in federations of benevolent governments where different hierarchical government levels tax the same base one can observe two types of externalities a horizontal externality working among governments of the same level and leading to tax rates that are too low compared to the social optimum and a vertical externality working between different levels of government and leading to suboptimally high tax rates building on the model of keen and kotsogiannis keen michael j kotsogiannis christos 2002 does federalism lead to excessively high taxes american economic review 92 1 363 370 we derive a discriminating hypothesis to distinguish vertical and horizontal tax externalities based on measurable variables this test is applied to a panel data set on local taxes in a sample of swiss municipalities that feature direct democratic fiscal decision making so as to maximize the correspondence with the benevolent governments of the theory we find that vertical externalities dominate they are thus an observed empirical phenomenon as well as a notable extension to the theory of tax competition

on the level of persistence in government size time series evidence and implications for the us for most developed countries the study of the long term trend of government size has become a major issue this study employs advanced time series techniques to investigate the long run properties of the government size series for the us by applying the persistence measures developed by campbell and mankiw quarterly journal of economics 102 857 80 1987 and cochrane journal of political economy 96 893 920 1988 this study finds big long term persistence in government size at all levels of the us government the finding indeed explains the fact that the us has gradually taken steps to control the size of government in the 1990s

an empirical analysis of state and local tax structure in the context of the leviathan model of government this paper has investigated the ability of an extreme and relatively simple model of political behavior to explain the level of revenues generated by state and local governments in general the behavior of these governments appears to be at least consistent with many of the fiscal outcomes predicted by the leviathan theory several although not all of the specific leviathan theory hypotheses considered received empirical support the evidence was consistent with the hypothesis that states utilizing comprehensive tax bases especially a personal income tax can be expected to generate higher levels of aggregate revenues strong support was also observed for the contention that intergovernmental competition by general purpose substate governments may serve as a substitute for constitutional constraints in limiting the revenue generating power of local governments

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

the political economy of benefits and costs a neoclassical approach to distributive politics this essay offers a rational political explanation for the notorious inefficiency of pork barrel projects with an optimization model of legislative behavior and legislative institutions the model emphasizes the economically arbitrary from a welfare point of view importance of the geographic incidence of benefits and costs owing to the geographic basis for political representation we explore the implications of a legislator s objective function and derive conditions under which a representative legislature will select an omnibus of projects each of which exceeds the efficient scale

strategic rigidity and foresight for technology adoption among electric utilities abstract the variation in the adoption of a technology as a major source of competitive advantage has been attributed to the wide ranging strategic foresight and the integrative capability of a firm these possible areas of competitive advantage can exist in the periphery of the firm s strategic vision and can get easily blurred as a result of rigidness and can permeate in the decision making process of the firm this article explores how electric utility firms with a renewable energy portfolio can become strategically rigid in terms of adoption of newer technologies the reluctance or delay in the adoption of new technology can be characterized as strategic rigidness brought upon as a result of a firm s core competence or core capability in the other more conventional technology arrangement this paper explores the implications of such rigidness on the performance of a firm and consequently on the energy eco system the paper substantiates the results by emphasizing the case of iberdrola s a an incumbent firm as a wind energy developer and its adoption decision behavior we illustrate that the very routines that create competitive advantage for firms in the electric utility industry are vulnerable as they might also develop as sources of competitive disadvantage when firms confront environmental change and uncertainty

piling on multilevel government and the fiscal common pool this article discusses the common pool problems that arise when multiple territorially overlapping governments share the authority to provide services and levy taxes in a common geographic area contrary to the traditional tiebout model in which increasing the number of competing governments improves efficiency i argue that increasing the number of overlapping governments results in overfishing from the shared tax base i test the model empirically using data from u s counties and find a strong positive relationship between the number of overlapping jurisdictions and the size of the local public sector substantively the overlap effect amounts to roughly 10 of local revenue

customer power strategic investment and the failure of leading firms why might firms be regarded as astutely managed at one point yet subsequently lose their positions of industry leadership when faced with technological change we present a model grounded in a study of the world disk drive industry that charts the process through which the demands of a firm s customers shape the allocation of resources in technological innovation a model that links theories of resource dependence and resource allocation we show that established firms led the industry in developing technologies of every sort even radical ones whenever the technologies addressed existing customers needs the same firms failed to develop simpler technologies that initially were only useful in emerging markets because impetus coalesces behind and resources are allocated to programs targeting powerful customers projects targeted at technologies for which no customers yet exist languish for lack of impetus and resources because the rate of technical progress can exceed the performance demanded in a market technologies which initially can only be used in emerging markets later can invade mainstream ones carrying entrant firms to victory over established companies

deviations from constituent interests the role of legislative structure and political parties in the states this paper investigates the determinants of state spending over 1960 1990 recent empirical studies suggest that state government expenditure is greater than the electorate desires our main finding is that expenditure was positively related to the number of seats in a state s legislature this is consistent with the hypothesis that logrolling leads representatives to spend more than their constituents would like we also find that political parties do not have a pronounced effect on overall levels of expenditure but do influence the composition of spending in particular democratic control of state government is associated with higher levels of welfare spending

on distinguishing between leviathan and public interest governments in a federal state the purpose of this paper is to derive testable implications for the proposition that provincial governments in a specific federal system are leviathans that is revenue maximizers the leviathan model associated with brennan and buchanan 1980 hypothesizes that governments behave like monopolies who seek to maximize their revenue this model is contrasted with an alternative hypothesis the public interest theory a theoretical model of a federal state based on the canadian system is constructed and testable implications are derived the principal feature of the model is that it is set in the context of a particular game involving the federal government provincial governments and a consumer in attempting to model this situation care has been taken to try to incorporate as many institutional features of the canadian federal system as possible while still allowing the model to be somewhat parsimonious with some modification the model may be applicable to other countries with similar federal systems

the flypaper effect identifying areas for further research the flypaper effect literature dates back three decades it is overwhelmingly neo classical in approach attempting to improve the median voter demand model and or temper it with public choice supply side perspectives whilst this approach provided valuable early substantial analytical insights more recent papers seem to have contributed only marginally to an understanding of the flypaper effect if indeed it exists at all hence as well as providing a long overdue comprehensive review of the literature on the flypaper effect this paper identifies more productive avenues for further research

the choice of municipal government structure and public expenditures numerous empirical studies have attempted to measure the effect of varying government structures on public expenditures i argue that these prior may have produced biased estimates as they are predicated on the assumption that government structures are exogenous

overlapping jurisdictions substitutes or complements this paper presents a simple model of the demand relationship between the activities undertaken by overlapping governments and uses the framework to estimate the relationship between municipal and county expenditures the empirical results reveal a complementary relationship between county and city general expenditures any public sector expansion effects of monopoly power at the county level will therefore be reinforced by greater municipal spending further expanding the total size of the local public sector on the other hand changes in county police and roads expenditures appear to have no strong stable impact on municipal police and roads expenditures respectively providing no reinforcing or offsetting municipal spending responses to decisions at the county level

reviving leviathan fiscal federalism and the growth of government this article revisits the influential leviathan hypothesis which pos its that tax competition limits the growth of government spending in decentralized countries i use panel data to examine the effect of fiscal decentralization over time within countries attempting to distinguish between decentralization that is funded by intergovernmental transfers and local taxation first i explore the logic whereby decentralization should restrict government spending if state and local governments have wide ranging authority to set the tax base and rate especially on mobile assets in countries where this is most clearly the case decentralization is associated with smaller government second consistent with theoretical arguments drawn from wel fare economics and positive political economy i show that governments grow faster as they fund a greater portion of public expenditures through intergovernmental transfers

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

mexican immigrant employment outcomes over the business cycle the united states is beginning to emerge from the deepest downturn the country has experienced since the great depression as of october 2009 the number of unemployed persons had risen by 8 2 million since the great recession began in december 2007 all demographic groups have experienced job losses but some groups have been more adversely affected than others repeating the pattern of most previous downturns the recession s impact has been worst for low education and minority workers one group that has been particularly hard hit is mexican immigrants data from the current population survey indicate that between the first quarter of 2007 and the second quarter of 2009 the unemployment rate among mexican immigrants rose from 4 2 percent to 11 3 percent and their employment rate dropped by 5 percentage points in contrast during that period the unemployment rate among non hispanic white natives rose from 3 7 percent to 7 8 percent and their employment rate fell by 2 6 percentage points mexican immigrants tend to be particularly vulnerable to economic downturns because of their relatively low skill levels they make up one fourth of all workers who do not have a high school diploma or equivalent and over one half of workers who have completed at most eighth grade when the economy slows employers look to shed their least productive employees first employers tend to invest less in training low skilled workers and therefore have less

labor demand in the time of covid 19 evidence from vacancy postings and ui claims abstract we use job vacancy data collected in real time by burning glass technologies as well as unemployment insurance ui initial claims and the more traditional bureau of labor statistics bls employment data to study the impact of covid 19 on the labor market our job vacancy data allow us to track the economy at disaggregated geography and by detailed occupation and industry we find that job vacancies collapsed in the second half of march by late april they had fallen by over 40 to a first approximation this collapse was broad based hitting all u s states regardless of the timing of stay at home policies ui claims and bls employment data also largely match these patterns nearly all industries and occupations saw contraction in postings and spikes in ui claims with little difference depending on whether they are deemed essential and whether they have work from home capability essential retail the front line job most in demand during the current crisis took a much smaller hit while leisure and hospitality services and non essential retail saw the biggest collapses this set of facts suggests the economic collapse was not caused solely by the stay at home orders and is therefore unlikely to be undone simply by lifting them

government size decentralization and growth empirical evidence from italian regions abstractthe aim of this study is to empirically assess the relationship among government size decentralization and economic growth in italian ordinary regions the empirical analysis based on a panel dataset on italian regions provides evidence in support of the existence of an inverted u shaped relationship between public expenditure and economic growth that depends on the degree of fiscal decentralization in particular according to our estimates on the specific italian case the optimal degree of decentralization is around 32 while the optimal government size value is approximately 52

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

legislative organization and government spending cross country evidence abstract the law of 1 n posits that an increase in the number of elected representatives fuels excessive government spending despite its wide acceptance as a stylized fact the law of 1 n has received only limited empirical scrutiny and the existing evidence for the american states provides mixed support for the thesis this paper examines the law of 1 n in bicameral and unicameral legislative structures using a cross section of democratic countries the results indicate that legislative size matters under both legislature structures but bicameralism dampens the 1 n effect relative to unicameralism

what should government do problems of social cost externalities and all that public choice as a field introduced the framework for a methodical economic analysis of political markets the output of these markets of course is reflected by the role that government plays that is specifically true with respect to the organization of economic activity gordon tullock has studied a myriad of aspects of this topic for more than half a century we examine his answers to the question of what should government do and how they have influenced and are still impacting the discussion on the proper role of government in the economy

the emergence persistence and recent widening of the racial unemployment gap census data show that the ratio of black to white unemployment rates currently in excess of 2 1 was small or nonexistent before 1940 widened dramatically during the 1940s and 1950s and widened again in the 1980s the authors decompose changes in the unemployment gap over the years 1880 1990 to identify the separate contributions of changes in observable worker characteristics and shifts in labor demand nearly all of the widening of the gap during the 1940s and 1950s can be attributed to regional shifts of workers and declining demand in markets where black workers were concentrated after 1970 improvements in the relative educational status of black workers would have narrowed the unemployment gap slightly but demand shifts adverse to black workers more than canceled out these gains

interjurisdictional competition and local public finance assessing the modifying effects of institutional incentives and fiscal constraints analysts have sought for years to explain the variations in municipal expenditures across communities with only modest success however recent efforts combining core propositions from the leviat

tax decentralization and local government size this paper investigates the relationship between fiscal federalism and the sizes of local governments while many empirical studies emphasized that grants encourage the growth of local public spending and local taxes constrain it they are more silent regarding the effects of different types of tax autonomy the paper addresses this issue by arguing that tax decentralization as organized on tax bases used only by local governments tax separation rather than on tax base sharing would restrain local public expenditures using an unbalanced panel of oecd countries the key finding is that only property taxes mostly based on a tax separation scheme seem to favor smaller local governments thus while tax decentralization is a necessary condition for limiting the growth of local governments it does not appear sufficient as tax separation schemes among government levels would in fact be required

fiscal decentralization and government size an extension this paper analyzes one method governments employ to circumvent the discipline of a competitive system of fiscal federalism intergovernmental collusion in the form of intergovernmental grants grants it is argued serve to encourage the expansion of the public sector by concentrating taxing powers in the hands of the central government and by weakening the fiscal discipline imposed on governments forced to self finance their expenditures the results reported suggest that intergovernmental grants do encourage growth in the public sector the results offer further support for the use of monopoly government assumptions in public sector modeling

exit voice and mimicking behavior evidence from swiss cantons previous empirical literature hasshown that in order to overcome agencyproblems voters make inter jurisdictionalcomparisons of fiscal performance whenmaking electoral decisions incumbents therefore anticipate voters feedback by copying fiscal policy decisionsfrom neighbors this paper argues thatfiscal autonomy exit as well as directlegislation voice enrich politicalcompetition reducing thus the influence of electoral competition onfiscal decisions consequently policymimicking does not matter in circumstancesof direct legislation and fiscal autonomywhere the impact of voters on the politicalagenda is particularly strong based onpanel data between 1980 and 1998 we findencouraging evidence supporting ourtheoretical arguments

does fiscal decentralization constrain leviathan new evidence from local property tax competition this paper reexamines whether fiscal decentralization constrains leviathan government using panel data for pennsylvania we compare actual property tax rates to the leviathan revenue maximizing rates for municipalities school districts and counties using spatial econometric methods we also estimate the degree of spatial dependence at the three levels of local government we find that fiscal decentralization results in stronger intergovernmental competition and lower tax rates we also find evidence of collusion among school districts that exhibit high interdependence but also high tax rates this calls into question the current literature s blind use of spatial dependence as a measure of intergovernmental competition

searching for leviathan an empirical study in several papers and a recent book geoffrey brennan and james buchanan 1977 1978 1980 have put forth a striking and controversial view of the public sector drawing by analogy on the conventional theory of monopoly in the private sector they envision a monolithic government that systematically seeks to exploit its citizenry through the maximization of the tax revenues that it extracts from the economy from this perspective they develop a fiscal constitution whose central purpose is to constrain leviathan by limiting in various ways its access to tax and other fiscal instruments while the leviathan hypothesis has been the source of lively debate and a wide range of policy proposals it has not been the subject of much systematic empirical work or testing this is a matter of some importance since the policy implications of the leviathan view are disturbing to put it mildly in particular brennan and buchanan virtually stand on their heads many of the basic theorems in public finance for an efficient and equitable tax system if in fact the leviathan view is an inaccurate depiction of the functioning of the public sector the introduction of their policy proposals is likely to make a sorry mess of the fiscal system the leviathan model does however have some straightforward implications for observable fiscal behavior it is the purpose of this paper to examine one of these testable implications brennan and buchanan stress that fiscal decentralization is itself a powerful constraint on leviathan competition among governments in the context of the interjurisdictional mobility of persons in pursuit of fiscal gains can offer partial or possibly complete substitutes for explicit fiscal constraints on the taxing power 1980 p 184 such competition among governments in a federal system that places heavy reliance on local fiscal decisions will greatly limit the capacity of leviathan to channel resources into the public sector in short as indicated by the epigraph to this paper the leviathan model implies that other things equal the size of the public sector should vary inversely with the extent of fiscal decentralization 2

the impact of government structure on local public expenditures though the relationship between local government structure and expenditure has received considerable attention there is little consensus as to how the features of representative government affect local expenditure an exception is city council size which has consistently been found to be positively related to spending previous results rely on cross sectional estimation which may be subject to omitted variable bias this paper analyzes three components of municipal governments the form of government the size of the city council and the election method of city councilors once fixed effects estimation is employed the positive relationship between city council size and expenditure disappears

centralization and the size of government in canada the determinants of the growth of government in canada over the period 1926 90 are examined of particular interest is whether changes in the degree of centralization have affected the public sector s share of gdp unlike other studies using time series data the effect of decentralization toward the provincial state and toward the local levels of government are measured separately empirical estimates provide strong support for the conclusion that citizen mobility acts as an important constraint on the growth of government