who withdraws housing equity and why the decision to extract home equity is examined using household level data for the uk over 1993 2003 at its peak during the period around 1 in 10 homeowners withdraw equity per year little is known about this financial decision i find that the equity withdrawal decision conforms to predictions from the standard life cycle framework and models that predict its use as a financial buffer the paper also estimates responses to the large house price appreciation and significant reductions in mortgage rates seen during the period

deliberative monetary valuation in search of a democratic and value plural approach to environmental policy the use of deliberative methods to assess environmental values in monetary terms has been motivated by the potential for small group discussion to help with preference formation and the inclusion of non economic values in this review two broad approaches are identified preference economisation and preference moralisation the former is analytical concentrates upon issues of poor respondent cognition and produces a narrow conception of value linked to utilitarianism the latter emphasises political legitimacy appeals to community values and tends to privilege arguments made in the public interest both approaches are shown to embrace forms of value convergence which undermine the prospects for value pluralism as a result exclusion and predefinition of values dominates current practice in order to maintain democratic credentials the importance attributed to monetary value needs to be left as an open question to be addressed as part of a process determining an agreement to pay to this end we identify a discourse based approach as a third way consistent with the democratic and value plural potential of deliberative monetary valuation

deliberative monetary valuation dmv issues in combining economic and political processes to value environmental change abstract this paper explores and contrasts the different social processes of valuation now appearing as economic means of valuing the environment monetary valuation via stated preference approaches has been criticised for assuming well formed and informed preferences and excluding a range of sustainability concerns such as rights fairness and equity deliberative monetary valuation dmv in small groups is a novel hybrid of economic and political approaches which raises the prospect of a transformative and moralising experience critics of standard contingent valuation approaches have advocated this as offering a way forward however there has been a lack of clarity as to the means of obtaining values the expected outcomes and their role moving to group settings of deliberation raises concepts of social willingness to pay and accept which are distinct from an aggregate of individual value although this does not seem to have been widely recognised a new classification of values is presented appropriate to the literature trying to merge economic and political processes values associated with the individual may be exchange values charitable contributions or fair prices while social values can be speculative expressive or arbitrated the use of dmv is shown to result in different values due to variations in the institutional setting and process of valuation

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

the causal effect of income on health evidence from german reunification we investigate whether there was a causal effect of income changes on the health satisfaction of east and west germans in the years following reunification our data source is the german socio economic panel gsoep between 1984 and 2002 and we fit a recently proposed fixed effects ordinal estimator to our health measures and use a causal decomposition technique to account for panel attrition we find evidence of a significant positive effect of income changes on health satisfaction but the quantitative size of this effect is small this is the case with respect to current income and a measure of permanent income

capital budgets borrowing rules and state capital spending abstract this paper compares the level and composition of government spending in u s states that maintain separate budgets for capital and operating expenditures with that in states that employ unified budgets it also investigates the effects of pay as you go financing rules for capital projects the empirical findings suggest that states with separate capital budgets spend more on public capital projects than comparable states with unified budgets there is no evidence that the presence or absence of a capital budget affects the level of non capital spending pay as you go requirements for financing capital projects are associated with lower levels of both capital and non capital spending

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

income related inequalities in mental health in great britain analysing the causes of health inequality over time using regression techniques this paper estimates the level of income related health inequality in gb in 1992 and 1998 inequality is decomposed to investigate which socio demographic factors are important contributors to health differences the paper includes a range of measured and subjective income variables to control for absolute income a relative deprivation measure is included to test the impact of income inequality on health inequality it is found that subjective financial status is a major determinant of ill health and makes a major contribution to income related inequalities in health relative deprivation is an important contributor for women but not for men

agent discretion regulatory policymaking and different institutional arrangements this paper examines agent discretion that is a result of the structure of the legislative process based on several distributions of lawmaking powers different games are analyzed in which players decide on regulatory policies the analysis shows that agent discretion increases as lawmaking powers are differentiated and assigned to specialized players particularly monopoly initiation power which allows a player to act as a gatekeeper has a substantial impact on discretion agent discretion will be even larger when these players also have heterogenous preferences the framework that is developed in this paper permits comparisons across different political systems with regard to agent discretion and legislative control on policymaking

types of bureaucratic interaction abstract a taxonomy of relationships between a public bureau and its sponsoring institution is modelled within a simple follower leader framework various assumptions are made with respect to who makes the decision about the bureaucratic activity level and with respect to cost information the role played by budgetary slack is emphasized deviations from the socially optimal bureau are identified but no general support is found for the view that bureaus tend to become too big

rent seeking bureaucracies and oversight in a simple growth model abstract following recent cross country empirical work research on public policy and growth has come to examine the impact of inefficient or corrupt bureaucracies most of this work has emphasized the interactions of bureaucracies with private markets by contrast this paper focuses on the relationship between rent seeking bureaucracies and their political authority we show that when oversight is relatively costly as in many developing economies the political authority exercises little monitoring of its agencies which reduces the effectiveness of productive government spending moreover when the technology used to provide public services is poor bureaus better succeed in requesting overly large budgets before triggering any monitoring both of these characteristics contribute to reducing the growth rate of already poor economies

discourse based valuation of ecosystem services establishing fair outcomes through group deliberation discourse based methods involving small groups of citizens have yet to be thoroughly engaged in the practice of ecosystem valuation this remains true despite the fact that many ecosystem goods and services such as clean air biodiversity and unpolluted lakes and rivers are considered to be public goods the conventional application of ecosystem valuation relies heavily on methodologies such as contingent valuation in which individuals are asked to express the value they attach to ecosystem goods and services in social isolation the difference between the public nature of ecosystem services and their valuation through individual expression has thus recently led to calls for more deliberative forms of environmental valuation because the allocation of ecosystem services directly affects many people and raises normative questions about social equity it is argued that carefully designed discursive methods will help ensure the achievement of social equity goals in this paper we examine the theoretical and normative assumptions that rest beneath the proposed turn towards discourse based methods and identify procedures for testing their application in the field 2002 elsevier science b v all rights reserved

the power of the purse and its implications for bureaucratic policy making a dilemma of the power of the purse is thatcutting an agency s budget may make a desired policyinfeasible i examine the implications of thisdilemma with a repeated game in which a bureau choosesunobservable policies after a legislature sets itsbudget the bureau is work averse and has its ownpolicy preferences and therefore may cheat but thelegislature may perform an audit to recover slack funds a main result is that if the legislaturedesires a higher policy level than the agency then itfaces a trade off between good but wasteful policiesand bad but efficient ones

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

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

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

political preferences for the pork barrel a generalization this paper provides a rational explanation for the observation of oversized coalitions often approaching unanimous size in the realm of distributive policies distributive policies are those which concentrate benefits in specific geographic areas states congressional districts while spreading costs through general taxation the explanation offered here that legislators may rationally prefer universalism to hard ball coalition politics generalizes earlier work of weingast and fiorina in particular it extends their results to pork barrel politics i e projects that are economically inefficient and demonstrates how packages of economically inefficient projects can nevertheless be politically popular the main theoretical feature that induces preferences for universalism is uncertainty over the composition of winning coalitions and consequently the desire for the political insurance that universalism provides

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

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

debt and depression we examine the effect of household financial indebtedness on psychological well being using a large household survey of families with children in britain existing studies that find a link between debt and depression tend to utilise small and highly selective samples of people and only self reported measures of financial stress responses to which are likely to correlate with subjective measures of health from additional household data we can construct a variety of objective quantitative measures of financial stress in order to validate self reported measures we show that although there is a positive association between subjective measures of financial well being and psychological well being individuals differ in their psychological response to objective household financial situations we also examine how the potential simultaneity of financial and psychological health might be handled

political and economic influences on the bureaucratic allocation of federal funds the case of urban development action grants abstract the distributive theory of politics predicts that federal budget allocations will be responsive to the committee position of congressmen and their majority minority party status but such political allocations are less likely where bureaucrats rather than legislators make the allocative decisions in such cases we must take into account bureaucratic motivations as well niskanen s bureaucratic budget maximization theory emphasizes such bureaucratic maximands and the efficient production of output or activity by the budget constrained bureau in this paper the two theories are tested using data from the urban development action grant program a capital subsidy program operated by the department of housing and urban development a set of political and bureaucratic decision criteria is employed as independent variables in a series of logit and tobit models in order to predict the likelihood of projects being funded and the amounts they will receive the political criteria are not significant in any specifications but the bureaucratic criteria suggest an investment maximizing risk avoidance strategy on the part of hud bureaucrats thus the results support the niskanen theory but do not support the distributive theory

the effects of congressional appropriation committee membership on the distribution of federal research funding to universities i introduction in 1994 members of the republican party pledged to seek legislation to impose term limits on members of congress this pledge stemmed from the popular belief that senior members of congress tend to promote personal interests or are more influenced by lobbying efforts that may not be representative of their constituents today term limits continue to be discussed but have not been enacted instead many members have focused their energies toward minimizing the time spent on any particular committee of congress believing that tenure on a committee is a more serious concern than simple tenure in congress implicit in these concerns is the issue whether as incumbent politicians plan to retire they will behave differently and if so whether tenure on a congressional committee exacerbates this behavior this article explores the role of membership on the appropriations committee on the distribution of federal research funding to universities specifically it explores whether funding is diverted to these universities because politicians use their position on a committee to promote personal or constituent interests previous research on shirking compares the voting records of politicians on certain issues with demographic and economic characteristics of the politicians constituents this article explores the issue of shirking differently i explore how membership on congressional appropriations committees affects the distribution of federal research funding to universities i look at two types of relationships between the members and the universities first i consider the relationship between members and the universities that are located in the members districts states in the case of senators second i examine the relationship between members and their undergraduate alma mater i use district representa tion to proxy favoritism that reflects a politician s constituents given that in most instances an alma mater affiliation is not the same as district representation i use alma mater affiliation to proxy favoritism that reflects the politician s personal interests federal research funding accounts for more than 60 of research funding received by research universities previous research has shown a positive impact of federal funding on research outcomes see adams and griliches 1998 arora and gambardella 1997 connolly 1997 payne and siow 2002 and payne 2001 except for payne and siow 2002 however these articles do not consider that political diversion of funds may promote or detract from research productivity as with any other federal program this article concentrates on the impact of membership on the house and senate appropriations committees because they wield the greatest power in the allocation of funding 1 using a panel data set spanning 26 years i explore how changes in the composition of the appropriations committees affects the distribution of research funding after controlling for the heterogeneity that exists across different universities the results suggest that both district representation and alma mater affiliation matter thus there is evidence of shirking for personal interests and evidence of members representing their constituents with respect to the representation of one s constituents the strongest results suggest that public universities benefit from representation on both the senate and house committees private universities however only benefit from representation in the senate with respect to alma mater affiliations the results suggest again that public universities benefit from representation on both the senate and house committees private universities also benefit from representation on both the senate and house committees the results also suggest that the tenure of the member on the committee matters as does whether the member is a part of the majority party in power in the congressional chamber

bureaucrats legislators and the size of government some recent theories have blamed the growth of government on budget maximizing bureaucrats who are assumedly capable of imposing their most preferred budget output combination on legislatures subject to cost and demand constraints however theoretical examination of the range of bargaining outcomes that might occur between bureau and legislature shows that budget maximizing behavior does not necessarily lead to super optimal levels of production nor do the suggested reforms of competition and privatization necessarily improve the situation in this bargaining model the central determinants of governmental growth are not budget maximizing bureaucrats but the legislature s decisions regarding mode of oversight and form of internal organization

the new economics of organization over the last ten years or so an important new approach to the study of organizations has emerged within economics it is perhaps best characterized by three elements a contractual perspective on organizational relationships a theoretical focus on hierarchical control and formal analysis via principal agent models this paper provides political scientists with an overview of the new economics of organization and explores its implications for the study of public bureaucracy so far positive political theory has not contributed much to our understanding of public bureaucracy in part this is due to the unsympathetic treatment that rational modeling and most other modes of quantitative analysis have long received from students of public administration the other side of the coin however is that positive theorists have not made much of an effort to develop theories of bureaucracy their concerns have centered around two basic mechanisms of social choice voting and markets and they have devoted little systematic attention to a third mechanism that is clearly important for understanding how societies and other aggregates make collective decisions this third and relatively unexplored mechanism is hierarchy movement toward a positive theory of hierarchies would fill a serious gap in the social choice literature while at the same time making a theoretical contribution that strikes to the essence of public bureaucracy indeed of all organizations in fact significant steps toward a positive theory of hierarchies have very recently been taken but by economists not political scientists in small numbers of course economists made contributions to the study of public bureaucracy some time ago with the pioneering works of downs 1967 tullock 1965 and niskanen 1971 but this new wave of theoretical work is different it is already a large complex body of literature that is the focus of innovation and excitement among a growing number of economists and it reflects an unusual degree of theoretical coherence and cumulative effort work in this tradition tends to receive orientation from a distinctive economic approach to the analysis of organizations an approach perhaps best characterized by three elements a contractual perspective on organizational relationships a focus on hierarchical control and formal analysis via principal agent models this approach has emerged from recent attempts to move beyond the neoclassical theory of the firm which assumes away all organizational considerations to a theory of economic organizations that can explain why firms corporations and other enterprises behave as they do propo

bringing stakeholder values into environmental policy choices a community based estuary case study this paper discusses a methodology for joining deliberation and analysis using the case study example of a national estuary program planning effort in tillamook bay or usa we describe the development of a community based evaluation tool that links actions proposed by technical experts e g biologists ecologists engineers to restore functioning of the tillamook bay estuary with the values and concerns expressed by community residents this task required the explicit consideration of trade offs across multiple benefits costs and risks we describe the design and results of an evaluation workbook developed with input from both the epa staff and community residents that provided insight to decision makers by presenting participants with explicit choices across the key dimensions and consequences of proposed actions the final section of the paper discusses the successes and limitations of the project in relation to evaluation needs associated with other environmental policy initiatives 2001 elsevier science b v all rights reserved

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

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

an adaptive model of bureaucratic politics in this article we outline a new framework for the formal analysis of bureaucratic politics it departs from standard neoclassical approaches notably those of niskanen 1971 and peltzman 1976 in several important respects first our approach explicitly models a system of three way interaction among bureaus politicians and interest groups second it allows for institutional features of each type of participant third it is a model of dynamic process fourth participants make choices adoptively rather than optimizing fifth participants are only minimally informed the result is a dynamic model of adaptive behavior very much in the spirit of simon s 1947 behavioral tradition that offers a new perspective on political control bureaucratic power and the intelligence of democracy

eliciting public values for complex policy decisions several approaches exist to illuminate and clarify public values relevant for making public policy decisions these include surveys indirect and direct value elicitation focus groups and public involvement this paper describes a new approach called the public value forum which combines elements of focus groups and direct multiattribute value elicitation techniques two public value forums were conducted with selected members of the west german public to elicit values relevant for setting long term energy policies the purposes of conducting the value forums were to examine the feasibility of eliciting values from laypeople and combining them with factual assessments of experts to determine the extent to which values elicited formally conflict with values elicited informally and to assess the advantages and disadvantages of the public value forum the results indicate that the public value forum is feasible that the participants felt comfortable with the procedure and that they were eager to resolve inconsistencies between their intuitive judgments and the multiattribute models there was substantial conflict between the formally and informally elicited values however the participants were able to resolve those conflicts in the course of the value forum tending towards more moderate alternatives in the process the public value forum provided useful information for the policy process and education for the participants however because it is expensive and time consuming its main application may involve small samples of opinion leaders and stakeholder representatives rather than large representative samples of the general public

noncognitive abilities and financial distress evidence from a representative household panel this paper provides evidence of how noncognitive abilities affect financial distress in a representative panel of households we find that people in the bottom quintile of noncognitive abilities are 10 times more likely to experience financial distress than those in the top quintile we provide evidence that this relation largely arises from worse financial choices and lack of financial insight by low ability individuals and reflects differential exposure to income shocks only to a lesser degree we mitigate endogeneity concerns using an iv approach and an extensive set of controls implications for policy and finance research are discussed received september 24 2017 editorial decision september 26 2018 by editor stijn van nieuwerburgh authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

the institutional dynamics of policy administration bureaucratic influence over securities regulation theory a dynamic systems model of administrative politics that 1 relaxes restrictive causal assumptions among the president congress and an administrative agency 2 emphasizes aggregate institutional behavior and 3 analyzes both anticipated and unanticipated policy behavior is set forth as a more general means to investigate agency political relationships hypotheses the main set of hypotheses focus on the aggregate institutional relationships among the president congress and administrative agency these four possible hypotheses include bureaucratic influence bureaucratic autonomy mutual influence and political influence the purpose here is to assess the relative merits of competing explanations for bureaucratic behavior securities regulation is a perfect area of inquiry to investigate these competing perspectives since the findings of existing research on this topic are disparate methods vector autoregressive time series statistical methods are used to empirically test the dynamic systems model of administrative politics by examining three empirical models of sec enforcement behavior in relation to presidential and congressional budgetary preference signals for the 1949 92 annual period results the sec sends potent signals of their own via their changes in regulatory outputs that will affect the budgetary preferences of its political principles however the sec s administrative outputs are shown to be somewhat less sensitive to political budgetary preference signals than what one would expect presidential and congressional budgetary preference signals with respect to the sec are interdependent to a sizeable extent thus raising doubts about the separate independent effect democratic institutions have over the bureaucracy the implications of this study suggest that conventional theories of agency political relations serve as an oversimplified way to study administrative behavior future research on this topic

political authority expertise and government bureaucracies by applying the revelation principle we focus on how a sponsor who possesses political authority could minimise the efficiency losses when bureaucrats are experts that is when they control information about the true costs of public services production our results come in striking contrast to those in the literature on bureaucracies and public procurement in a two types setting and in the absence of monitoring and control mechanisms we find that the agency is productively efficient under certain conditions the agency is also allocatively efficient while under others the low cost bureau oversupplies and the high cost agency undersupplies its output

shifting foundations of agricultural policy analysis welfare economics when risk markets are incomplete the neat alignment of resources output and prices specified by the perfect competition model is far from duplicated in free markets and the equally neat alignment assumed under the constraints of a program is not experienced when programs are in effect in particular areas under empirically determined supply curves are unlikely to represent opportunity costs the basic theory is invaluable in providing a conceptual orientation for the analysis of programs but the assumptions implicit in the literal use of simple forms of it for policy conclusions are breathtakingly heroic

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

explaining bureaucratic optimism theory and evidence from u s executive agency macroeconomic forecasts we offer a theory of intertemporal bureaucratic decision making which proposes that an agency s forecast optimism is related to the extent to which it discounts future reputation costs associated with bureaucratic incompetence agency forecasts of the distant future are more likely to be optimistic than short term forecasts we claim that unstable organizations will discount reputation costs at a steeper rate than stable organizations and therefore will produce more optimistic forecasts we test our theory using macroeconomic forecasts produced by the office of management and budget omb and the social security administration ssa across six forecast horizons from 1979 to 2003 the statistical results are generally consistent with our theory omb generates more optimistic long term forecasts than ssa further differences in forecast optimism between these executive branch agencies widen as the forecast horizon increases our evidence suggests that more stable agencies place a premium on minimizing reputation costs conversely less stable agencies are more likely to accommodate political pressures for forecast optimism these findings underscore the importance of institutional design for understanding how executive agencies balance the conflicting goals of political responsiveness and bureaucratic competence within the administrative state

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

privatization and government size a budget constraint view of government shows that privatization need not alter spending when it is implemented without a rule forbidding re use of the funding backing newly privatized programs only when these funds are eliminated from the budget process e g tax rebates or permanent deficit reduction can these funds not back new programs or expand existing programs this is an important caveat since privatization proposals do not contain such rules with such rules privatization can increase allocational efficiency and lead to smaller government size

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

coexistence of public and private job agencies screening with heterogeneous institutions in response to the analysis of bureaucracies and the finding of inherent inefficiencies public choice theory argues for an increase in competition by contracting out government services and deregulation the paper explores the effect of coexisting public and private employment services in a model with private information of the worker about her ability and unobservable effort choice the employer s use of an efficient unemployment exchange and an efficient private agency may lead to optimal screening with first best contracts this is due to the assumption that good types of workers lose more human capital than bad types in periods of unemployment or mismatch in contrast to standard screening contracts a bad type of worker earns an information rent if the employment exchange is inefficient but the employer chooses not to use the private agency for good types

do cio it budgets explain bigger or smaller governments theory and evidence from u s state governments given the recent concern on big governments and rising budget deficits in the united states and european nations there has been a fundamental economic debate on the proper boundary and role of governments in a society inspired by this debate we study the relationship between information technology it and government size drawing on a broad range of the literature from multiple disciplines such as information systems industrial organization and political sciences we present several theoretical mechanisms that explain the impact of it on government expenditures using a variety of data on it spending and state government expenditures we find that greater it investments made by a state chief information officer cio are associated with lower state government spending it is estimated that on average a 1 increase in state cio budgets is associated with a reduction of as much as 3 49 in state overall expenditures this study contributes to the literature by identifying a key technological factor that affects government spending and showing that it investments can be a means to restrain government growth

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

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

the household bankruptcy decision personal bankruptcy filings have risen from 0 3 percent of households per year in 1984 to around 1 35 percent in 1998 and 1999 transforming bankruptcy from a rare occurrence to a routine event lenders lost about 39 billion in 1998 due to personal bankruptcy filings but economists have little understanding of why households file for bankruptcy or why filings have increased so rapidly until very recently studying the household bankruptcy decision was very difficult because no household level data set existed that included information on bankruptcy filings in this paper we use new data from the panel study of income dynamics which includes information on bankruptcy filings to estimate a model of households bankruptcy decisions we find support for the strategic model of bankruptcy which predicts that households are more likely to file when their financial benefit from filing is higher our model predicts that an increase of 1 000 in households financial benefit from bankruptcy would result in a 7 percent increase in the number of bankruptcy filings our model also predicts that if the 1997 national bankruptcy review commission s proposed changes in bankruptcy exemption levels were implemented there would be a 16 percent increase in the number of bankruptcy filings each year but if the 100 000 cap on homestead exemptions recently passed by the u s senate were adopted our model predicts that there would be only a negligible effect on the number of filings we find little support for the nonstrategic model of bankruptcy which predicts that households file when adverse events occur which reduce their ability to repay finally controlling for state and time fixed effects our model shows that households are more likely to file for bankruptcy if they live in districts with higher aggregate filing rates

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

a theoretical approach to deliberative valuation aggregation by mutual consent in deliberative valuation a small group of selected persons explores the values that should guide collective decisions through a process of reasoned discourse proponents argue that deliberative techniques enhance the effectiveness and perceived legitimacy of policy making by facilitating public participation this paper outlines an approach to deliberative valuation that is grounded in democratic theory social psychology and cooperative game theory emphasizing applications to the monetary valuation of environmental services the analysis suggests that deliberative groups that employ consent based choice rules may aggregate individual values in a manner that systematically departs from the additive aggregation procedures of standard cost benefit analysis

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

will a shrink make you richer gender differences in the effects of psychotherapy on labour efficiency this paper provides a first theoretical and empirical analysis of the effects of psychotherapy on individual productivity we build a simple model in which a deterioration of mental health endogenously causes a decrease in productivity which is counterbalanced by psychotherapy we test our hypotheses on the british household panel survey data we find that individuals suffering from mental health problems benefit economically from consulting a psychotherapist moreover we find that the returns are higher for men than for women even though women are more likely to seek help

a theory of jurisdictional assignments in bureaucracies 1 what determines the allocation of tasks among government agencies this paper develops a formal model of task allocation that argues that jurisdictions are strategically designed to achieve legislative goals in the model agencies choose unobservable policies and political outcomes are a noisy indicator of these choices the legislature therefore faces a compliance issue when the agencies policy preferences are different from its own the legislature exerts control by defining agency jurisdictions setting ex ante budgets and choosing ex post contractual inducements the principal result is that tasks will be consolidated under a single roof when that agency prefers lower levels of policy than the legislature in other cases separating tasks prevents resources from being allocated in a manner undesirable for the legislature

legislators and interest groups how unorganized interests get represented this paper derives a supply price for public policy using a constrained maximization model in the model three sets of agents each have preferences over outcomes organized interest groups offer campaign contributions to improve their own wealth voters offer votes to obtain outcomes closer to their most preferred outcomes and legislators seek both campaign contributions and votes to obtain reelection a given legislator s supply price for policy is shown to depend on the productivity of his effort as determined by committee assignments priority and ability and by the preferences of his unorganized constituency in the home district two extreme assumptions about the effectiveness of campaign spending in eliciting votes are used to illustrate the comparative statics properties of the model the prediction of the model is that interest groups will in general seek out legislators whose voters are indifferent to the policy the interest group seeks thus voters who do have preferences over policy are in effect represented even though they are not organized

political solutions to market problems for some market failures serve as a rationale for public intervention however the fact that self interested market behavior does not always produce felicitous social consequences is not sufficient reason to draw this conclusion it is necessary to assess public performance under comparable conditions and hence to analyze self interested political behavior in the institutional structures of the public sector our approach emphasizes this institutional structure warts and all and thereby provides specific cautionary warnings about optimistic reliance on political institutions to improve upon market performance

markov perfect equilibrium in multi period games between sponsor and bureau we formulate a simple model of the interaction between a sponsor and a bureau the sponsor sets the bureau s budget while the bureau decides on how much to spend on slack we compute numerically markov perfect equilibria of multi period games where the agents move alternately and apply markov strategies both agents are worse off compared to the one period game with simultaneous moves as the discount factors increase the equilibrium outcome becomes less cooperative in nature

democratic valuation dv using majority voting principles to value public services the now dominant survey approaches to value public services remain contentious a common explanation is that stated preferences are generally difficult to measure i argue that the key problems of the dominant survey approaches can be explained more specifically by their ambition to measure individuals maximum willingness to pay wtp to estimate wtp researchers need to ask questions involving counterfactual prices to specify doubtful implementation rules and to aggregate preferences in a way that is inconsistent with political rights the procedures engender problems with scenario credibility incentive compatibility adequate information provision and democratic legitimacy as an alternative to the standard stated preference paradigm i propose a democratic valuation approach dv dv measures the exchange value of public services in the political domain in terms of the aggregate valuation implied by the median preferred expenditure level for public services the blueprint for survey design is the public finance referendum with multiple proposals i suggest that empirically straightforward and democratically legitimate exchange values may be a more powerful input to public policy decisions than theoretically correct but empirically problematic estimates of mean willingness to pay

deliberative monetary valuation and the evidence for a new value theory economists concerned with validity are combining stated preference methods with participatory deliberation to address on going criticism deliberative monetary valuation dmv uses formal methods of deliberation to express values for environmental change in monetary terms however the results have begun to define different realms of value reflecting pluralism in public concern over environmental change reviewing empirical dmv studies evidences a range of issues regarded as external to economics and the validity of its methods issues which are typically kept at arms length by most environmental economists namely multiple values incommensurability and lexicographic preferences social justice fairness and non human values

endogenous public sector budgeting to centralize or not in this paper the impact of budget size on a government s choice to centralize or decentralize the budgetary process is investigated using asymmetric information differing preferences and endogenous budgetary arrangements the central government chooses between a budgetary process that excludes the regional board centralization and one that includes the board decentralization in the determination of program budget levels it is predicted that the central government will decentralize the budgetary process at low and centralize at high overall budget levels switching from decentralization to centralization is predicted to

government manipulation of constitutional level transaction costs a general theory of transaction cost augmentation and the growth of government transaction costs are pivotal to the ongoing political choice of where to draw the line between the private sector and the public sector contrary to the dominant paradigm politically important transaction costs are actively manipulated in the public sector by those who perceive potential personal gain from such action over time transaction cost changes so created by government decision makers may fundamentally redefine the role and scope of government to analyze the role of transaction costs in the growth or decline of government it is essential to distinguish transaction costs that are unavoidable realworld constraints from those that are contrived in the sense that they are created by government officials use or extension of their existing authority once discretionary power is vested in the government its officials have both the capacity and the incentive to restructure the transaction costs constraining the revision ofgovernrnental authority this restructuring of transaction costs may take two forms 1 altering people s perceptions of the costs and benefits of governmental authority in a given sphere an information cost problem 1 2 altering the cost of acting upon one s perceptions of the costs and benefits of collectivization in order to procure revision of the scope of governmental authority 2

budget maximizing governmental agencies an empirical test niskanen s theory of government budgeting involving powerful agencies interested in maximizing their budgets through bargaining with a weak poorly informed governmental sponsor has received wide recognition this paper presents the first direct empirical tests of niskanen s ideas one implication of niskanen s model of budgeting is that the demand for public services will appear to be elastic niskanen s model also implies restrictions on the elasticity of the derived demand for labor in the public sector neither set of predictions is supported by existing empirical research on government activity

valuing environmental policy options a case study comparison of multiattribute and contingent valuation survey methods this paper describes a promising new evaluation approach called a value integration survey that uses the objectives and tradeoffs expressed by participants to value environmental policy options this constructive technique which builds on the interactive elicitation process of decision analysts assists stakeholders in clarifying their values and in agreeing on a policy alternative the paper compares this multi attribute valuation method to contingent valuation surveys describes the sequence of respondents tasks and presents results from a case study comparison of contingent valuation and value integration survey methods in the context of valuing options for fire control in oregon s oldgrowth forests

economic valuation by the method of paired comparison with emphasis on evaluation of the transitivity axiom the paired comparison pc method is used to investigate reliability transitiv ity and decision time for binary choices among goods and sums of money the pc method reveals inconsistent choices and yields individual prefer ence order over the set of items being compared the data reported support the transitivity as sumption and demonstrate high reliability for individual preference order the paper also discusses using the pc method to obtain conser vative median and mean estimates of willingness to accept compensation for public and private goods the pc method may prove useful for valu ing public goods and warrants further study jel 426

a critical comment on niskanen s model niskanen s model has been largely criticized but it still remains a standard explanation of bureaucracy s behaviour in this paper we criticize the monopoly power that niskanen assigns to the bureaucracy a bilateral monopoly between bureaucrats and politicians might be a much more adequate framework for explaining the bureaucracy s behaviour than niskanen s original formulation of a perfect discriminating bureaucracy in a bilateral monopoly model in no case the type of relationship which holds between the sponsor and the bureau leads to an oversupply of output should an excess output occur it would be a consequence of the political decision making mechanisms this result stands in sharp contrast to the niskanen s model but at the same time it is coherent with the fact that when the sponsor introduces control and monitoring mechanisms the sponsor does not pretend to decrease the output but rather to supervise and to reduce the costs of producing the output

home is where the equity is mortgage refinancing and household consumption applying a permanent income model with exogenous liquidity constraints and mortgage behavior household refinancing when mortgage interest rates are historically high and rising a persistent empirical puzzle is explained using data from the panel study of income dynamics households experiencing an unemployment shock and having limited initial liquid assets to draw upon are shown to have been 25 more likely to refinance 1991 94 on average such liquidity constrained households converted over two thirds of every dollar of equity they removed into current consumption as mortgage rates plummeted 1991 94 producing an estimated expenditure stimulus of at least 28 billion

budgets as dynamic gatekeepers most large organizations allocate resources by means of fixed budgets each subunit is normally entitled to spend a defined amount over a fixed period usually one year fixed budgets create clear incentives for subunits to control costs yet such arrangements create major incentives for dynamic inefficiency for example by encouraging subunits to exhaust their budgets toward the end of the fiscal year this paper develops a dynamic optimization model to examine the incentives fostered by budget systems it invokes the metaphor of physicians involved in a health care delivery system to examine incentives created by decentralized gatekeeping as a mechanism to control medical costs the paper also discusses some methods to reduce the incentives for dynamic inefficiency that fixed budgets create

the political economy of state medicaid policy we develop and test a market based model to explain variations in states welfare medicine policy decisions the empirical results support the model of state policy outputs indicating that states spending efforts for welfare medicine are most sensitive to the supply of services within their borders we learn in addition that spending effort declines with demand for services indicating that the states spending the highest proportions of total personal income for the program are those who need it most and can afford it least measures of political system development affect spending effort positively and significantly suggesting that ideology diversity of interests and administrative professionalism increase states welfare efforts

a strategic theory of bureaucratic redundancy do redundant bureaucratic arrangements represent wasteful duplication or a hedge against political uncertainty previous attempts at addressing this question have treated agency actions as exogenous thus avoiding strategic issues such as collective action problems or competition i develop a game theoretic model of bureaucratic policy making in which a political principal chooses the number of agents to handle a given task importantly agents have policy preferences that may be opposed to the principal s and furthermore may choose their policy or effort levels among the results are that redundancy can help a principal achieve her policy goals when her preferences are not aligned with the agents but redundancy is less helpful if even a single agent has preferences relatively close to the principal s in this environment collective action problems may cause multiple agents to be less effective than a single agent redundancy can also be unnecessary to the principal if the agent s jurisdiction can be terminated

debt and depression causal links and social norm effects individuals exhibiting problems repaying their debt obligations also exhibit much worse psychological health selection into problem debt on the basis of poor psychological health accounts for much of this difference the causality between problem debt and psychological health may be two way using individual level uk panel data local house price movements exogenous to individual households are used to establish the causality from problem mortgage debt to psychological health in addition the social norm effects of problem debt are investigated using local bankruptcy and repossession rates results indicate there are sizeable causal links and social norm effects in the debt psychological health relationship language en

delegation as commitment the case of income tax audits in this article we study the value of delegating authority over income tax audit policy arising from the incompleteness of contracts consider a utilitarian government whose ability to commit is limited to aggregate dimensions of its audit policy as publicly verifiable information about detailed allocations of audit budgets is not available we show that the welfare level associated with the full commitment solution can be attained by delegating authority over audit policy to a manager the latter is offered a simple incentive scheme based only on the aggregate variables which are publicly observable in contrast if the government retains authority direct commitment to these same variables does not allow the full commitment welfare level to be achieved thus despite sharing a common informational basis delegation may perform better than centralized arrangements in the presence of incomplete contracts