state fiscal institutions and empty nest migration are tiebout voters hobbled abstract using the health and retirement study and a national panel of local fiscal data we test a lifecycle model of tiebout sorting on average cross state empty nest movers presumed to be out of fiscal equilibrium experience large fiscal gains in the form of reduced exposure to local school spending and property taxes while local empty nest movers experience no fiscal adjustment we find evidence that within state fiscal adjustment is constrained by state institutions that limit local discretion empty nest households moving within states with school finance equalization do not engage in tiebout consistent fiscal adjustment while those moving within states lacking school finance equalization adjust substantially

state aid programs for equalizing spending across local school districts does the structure of the program matter or only it s size this paper provides interesting insights into an important causal mechanism underlying murray evans and schwab s am econ rev 88 4 789 812 1998 finding that court mandated reforms result in less inequality in spending per pupil levels across rich and poor school districts within a state treating the choice of an education program s structure as endogenous following the analysis of leyden public finance finances publiques 47 229 247 1992 public choice 115 1 2 83 107 2003 yields empirical results suggesting that court mandated reforms increase the likelihood that a program s structure will include a price effect and that the inclusion of a price effect in turn results in a decrease in spending inequality

data watch research data in the economics of education economists have developed a wide variety of policy relevant empirical research projects that address the role of education in promoting individual and social welfare recent examples include studies on the impact of school spending on educational outputs the differences between public and private schools the effects of competition among schools the determinants of teacher quality the impact of unions on schools and the consequences of education finance reform one reason for the proliferation of such empirical studies has been the emergence of high quality micro level data on education in this paper we discuss three broad types of data sets data on educational institutions data on educational outcomes at the individual level and data sets from school reforms and experiments in each section we summarize some of the leading surveys discuss the general availability of the data and identify some but certainly not all of the research that has utilized these data this review is by no means exhaustive we have restricted our attention to analyses of data sets describing primary and secondary education moreover we emphasize data sets that are excellent sources of information but are less wellknown and utilized by economists in particular two obvious omissions from this review are the national longitudinal survey of youth nlsy and the panel study of income dynamics psid both are broad based studies that track people over periods of time gathering information both on educational attainment and on many other issues as well

human capital accumulation in a federation abstract more than half of the variation across u s school districts in real k 12 education expenditures per student is due to differences between rather than within states i study the welfare implications of redistribution of education expenditures by the federal government using an analytically tractable model of human capital accumulation with heterogeneous agents and endogenous state policies the net welfare effect of federal redistribution depends on a trade off between the positive effect of redistributing resources toward poorer states and the negative effect resulting from misallocation of population across states federal redistribution increases welfare in a calibrated version of the model

bidding for contracts in a competitive procurement a buyer seeks to institute a bidding and contracting procedure which selects the most efficient firm to undertake the contract while offering terms that promote risk sharing between buyer and contractor this paper develops a model to analyze formally the trade off between the objectives of risk sharing and efficient contractor selection

buying their votes a study of local tax price discrimination i introduction financial support for public schools in developed countries has recently been declining as governments face increasing pressure to balance their budgets by reducing expenditures on public services public school revenues may be particularly vulnerable in countries where elderly residents will compose a rising share of the population while the percent of united states residents over the age of 65 was 12 4 in 2000 the u s census bureau 2008 predicts this will rise to 16 3 by 2020 and 20 7 by 2050 recent growth in the upper middle aged population ages 55 64 has occurred throughout the united states and if current trends continue communities with the largest growth in the elderly share ages 65 and over over the next 30 years will experience this growth primarily due to aging in place rather than residential migration frey 2007 the typical school district will thus have an increasing share of adults who do not consume public schooling services this trend could have two important implications for school districts 1 decreased political support for school expenditures and 2 a greater tax base per student due to a reduction in the relative size of the school aged population if the former effect dominates the latter then local district revenues per student will decline this dynamic would be consistent with prior u s trends figlio and fletcher 2012 find that most of the within metropolitan area variation in suburbs age distributions in 1980 and 1990 can be traced back to these suburbs age distributions when adults settled there in earlier decades those authors simulate the shares of elderly adults residing in various suburbs based on the aging in place of early residents and their simulated elderly shares are negatively correlated with suburban school expenditures state or federal governments could potentially alter this dynamic by subsidizing local property tax reductions that are targeted toward elderly homeowners elderly homeowners receiving these reductions might support higher levels of local public school spending because they can maintain high property values at a relatively low cost in other words elderly homeowners preferred level of local tax revenues may be sensitive to their marginal local tax price the change in their tax payments required to increase local school district revenues by one dollar by influencing elderly homeowners preferred local tax rates targeted tax price reductions may shift the identity of the local median voter and thus moderate how changes in demographics affect local public revenue this article is the first to empirically examine whether targeted tax price reductions moderate the impact of age demographics on local government revenues prior studies examined how the aging in place of local populations affects public school revenues figlio and fletcher 2012 harris evans and schwab 2001 ladd and murray 2001 and this article tests whether there is important within sample heterogeneity in these effects using similar methods as these prior studies the empirical models below isolate the exogenous component of changes in local age demographics by using lagged population shares as instrumental variables predicting future age demographics to test for heterogeneous effects i assembled a longitudinal data set concerning states property tax reduction policies for elderly homeowners the results confirm earlier studies findings that exogenous increases in the fraction of elderly residents ages 65 and over on average decrease tax revenues in u s school districts however state financed reductions in elderly homeowners marginal local tax prices significantly reduce the negative effect of the local elderly population share this negative effect is only large in communities not offering any targeted local tax price reductions to elderly homeowners significant differences in the effects of the elderly share across state policy regimes are robust to several alternative empirical specifications including comparisons of school districts that are located near each other on opposite sides of state borders

mobility behavior of the elderly mobility patterns of the elderly provide a particularly interesting theoretical subcase of a more general migration model which interacts individual specific traits e g health and retirement status and location specific traits e g amenities rents and wages the spatially invariant incomes pensions dividends etc of the retired are shown to lead to migration toward areas where the wage and rent compensation for amenities necessary for spatial equilibrium occurs primarily in the labor market rather than in the land market empirical evidence appears to be consistent with theoretical expectations more investigation however is clearly desirable

do the elderly vote with their feet this research explores whether the elderly vote with their feet by migrating to states with government policies that treat them favorably a theoretical model is presented that clarifies the effects of cost of living amenities and the public sector on migration decisions and that informs our empirical analysis using state level migration data from the 1990 census we estimate out migration and in migration equations that suggest that the public sector is an important determinant of elderly migration but in sometimes unexpected ways our results lend some support for the tiebout hypothesis but they also raise serious questions about the nature of the elderly s preferences for government policy

putting renewable energy auctions into action an agent based model of onshore wind power auctions in germany abstract the following analysis looks into auctions for renewable energy specifically onshore wind power in germany following an agent based modeling approach the two most commonly applied auction pricing rules are compared uniform and pay as bid and first conclusions on outcomes are drawn for future policy design the auctions are modeled to closely represent the auction design foreseen in the german renewable energy sources act eeg 2017 and replicate their parameters the analysis draws on auction theory for both pricing schemes individually rational agents with independent valuation are assumed as support for renewable electricity through auctions is to be established permanently and auction rounds will be held multi annually a further focus lies on agents learning over time by adapting their behavior to new information the model results show that pay as bid exhibits lower prices and thus support costs than uniform pricing whereas allocative efficiency suffers under pay as bid over time one can observe a decline in the strike price which is due to learning effects whereas agents profits increase in the course of the auctions furthermore smaller actors will experience difficulties and agent diversity is likely to suffer in the long term if this is not accounted for in other ways

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

on optimal competitive contracting we present an example of risk neutral bid taker and bidders in which the bid taker obtains a greater expected revenue from auctioning an inefficient contract than from auctioning an efficient contract this occurs because in going from the efficient contract to an inefficient but almost efficient contract the winning bidder s expected profit decreases faster than the value of the output produced under the contract net of production costs decreases therefore the bid taker s expected revenue the value of the output less the winning bidder s expected profit increases the competitive letting of a contract introduces a factor not present when somehow letting a contract noncompetitively in particular changing the contract not only affects the efficiency of the contract but also affects the amount of the contract s value that will be captured by the contract winner as profit therefore for competitively let contracts the optimal contract for the bid taker to offer turns out less efficient than can b

lotteries litigation and education finance 1 introductionhistorically the finance of public education in the united states has been largely based on revenue raised locally through property taxation however this system has been routinely criticized on the grounds that the resulting distribution of educational opportunity is inequitable and that it may lead us to forgo socially productive investments in education over the past several decades these concerns have motivated extensive litigation in almost every state challenging the constitutionality of property based education finance to date the supreme courts in 17 of these states have encouraged increased state aid to school districts by concluding that their current systems of education finance were indeed unconstitutional however over this same period 37 states have also turned to new state lotteries as a way to increase state funding for services like education there are two shared reasons that these disparate approaches to directing new resources to education might prove to be ineffective first it is by no means clear that these reforms would actually increase state or local educational spending state legislatures may respond slowly if at all to a court ruling that encourages increased aid furthermore states that earmark new lottery revenues for education may simply choose to then reduce their education appropriations from other sources and even if these reforms do increase state aid the effect on educational spending may be undone by reductions in education revenues raised from local and federal sources 1 second even if new state aid were to increase local education spending it is not clear that these new resources would be allocated in ways that actually improved school quality the extensive though controversial literature on educational productivity suggests that new resources would not be used effectively e g burtless 1996 this study provides novel empirical evidence on these policy relevant concerns by examining the consequences of two of the most recent and noteworthy education finance reforms in 1993 tennessee began court ordered education finance reforms while the neighboring stale of georgia simultaneously initiated a lottery explicitly designed to promote educational spending these policy experiments are partly of interest simply because of their narrow consequences for the patterns of educational finance and spending within these states however they are also likely to be of more general interest because they provide evidence on a question of importance to policymakers and voters everywhere specifically the consequences of these reforms provide evidence on how plausibly exogenous increases in available educational resources are actually spent though there is an extensive literature on educational productivity there is surprisingly little evidence on how school districts allocate resources 2 furthermore these evaluations may also prove of more general interest because each of these states adopted rather unique and interesting strategies to earmark new state aid for specific educational expenditures in tennessee the court ordered education finance reforms were accompanied by broader educational reforms designed to ensure the efficacy of the new state aid these measures included accountability measures for schools and school districts based on controversial value added measures of student test performance the phasing in of mandatory class size regulations and a high profile initiative to promote technological investments in classrooms georgia also attempted to earmark new lottery revenues for specific educational spending by promising new and highly visible educational initiatives i e helping outstanding pupils educationally hope scholarships prekindergarten prek programs and technological investments for classrooms the absolute and comparative success of these earmarking attempts can provide evidence to other communities that hope to promote spending on specific educational functions

the rise of the states u s fiscal decentralization in the postwar period article i nfo article history one of the most dramatic changes in the fiscal federalism landscape during the postwar period has been the rapid growth in state budgets which almost tripled as a share of gdp and doubled as a share of government spending between 1952 and 2006 we argue that the greater role of states cannot be easily explained by changes in tiebout forces of fiscal competition such as mobility and voting patterns and are not accounted for by demographic or income trends rather we demonstrate that much of the growth in state budgets has been driven by changes in intergovernmental interactions restricted federal grants to states have increased and federal policy and legal constraints have also mandated or heavily incentivized state own source spending particularly in the areas of education health and public welfare these outside pressures moderate the forces of fiscal competition and must be taken into account when assessing the implications of observed revenue and spending patterns

the effect of welfare and wage levels on the location decisions of female headed households abstract this paper develops and estimates a model designed to calculate the impact of welfare benefit levels wages and tax rates on the location choices of female headed households the empirical model assumes that women simultaneously choose both where they will live and whether or not they will participate in the welfare system based on their expected income and expected hours of work for each location participation possibility these income and hours expectations depend in turn on the welfare benefits wage and tax rates facing each household in each location it is found that both regional welfare levels and wage rates have a significant effect on the location decisions of this population the probability of a typical female headed household with little outside income leaving an area with low welfare payments and low wages can be as much as 12 points higher over a 4 year period than the probability of leaving a high welfare high wage area

education equity and intergenerational mobility quasi experimental evidence from court ordered school finance reforms starting from early seventies court ordered school finance reforms sfrs have fundamentally changed the landscape of primary and elementary education finance in the us this paper employs sfrs as quasi experiments to quantify the effects of education equity on intergenerational mobility within commuting zones first i use reduced form difference in difference analysis to show that 10 years of exposure to sfrs increases the average college attendance rate by about 5 2 for children with the lowest parent income the effect of exposure to sfrs decreases with parent income and increases with the duration of exposure second to directly model the causal pathways i construct a measure for education inequity based on the association between school district education expenditure and median family income using exposure to sfrs as the instrumental variable 2sls analysis suggests that one standard deviation reduction in education inequality will cause the average college attendance rate to increase by 2 2 for children at the lower end of the parent income spectrum placing the magnitudes of these effects in context i conclude that policies aimed at increasing education equity such as sfrs can substantially benefit poor children but they alone are not enough to overcome the high degree of existing inequalities key words public education finance intergenerational mobility school finance reforms quasi experiments

estimating permanent and transitory income elasticities of education spending from panel data abstract we use a twenty one year panel of data to examine the role of past income and aid and expectations of future income in regressions explaining state and local education spending we show that simple estimates of the elasticity of spending with respect to financial resources are not robust to specification changes because the variables are non stationary over time causing inconsistent estimation of model parameters estimation in first differences or equivalently in growth rates solves the time series problems and produces robust estimates of the model s parameters we then show that current spending by states responds to changes in expected future income this explains why using fixed effects in simpler models reduces estimated income elasticities fixed effects partially capture permanent income effects on spending estimates of lagged income are significant when used in models that do not explicitly model the expectations process but present and past aid both have no effect on education spending models with structural assumptions about expected income produce estimates very similar to simpler models which include lagged information on income as a control variable we conclude with recommendations for estimating models when only cross section data or only short panels are available

competition between private and public schools testing stratification and pricing predictions abstract when there are peer effects in education private schools have an incentive to vary tuition to attract relatively able students epple and romano american economic review 88 1 1998 33 develop a general equilibrium model characterizing equilibrium pricing and student selection into schools when peer effects are present the model predicts that competition will lead private schools to give tuition discounts to more able students and that this will give rise to an equilibrium exhibiting stratification by income and ability between the public and private sectors and to a hierarchy of schools within the private sector the model also yields a variety of comparative static predictions the predictions of the model are tested in this paper using a unique data set assembled by figlio and stone research in labor economics 1999 115 tests of equilibrium predictions of the model reveal that the propensity to attend private school increases with both income and ability and among private schools the propensity to attend the highest tuition schools rises with both income and ability within private schools tuition declines with student ability with a substantial number of even high income households paying little or no tuition the correlation between income and ability is greater in public than private schools tests of comparative static predictions of the model reveal that both income and ability become stronger predictors of private school attendance as public school expenditure falls income becomes increasingly important in determining placement in the private school hierarchy as public school expenditure falls discounts to ability in the lowest quality private school decline as public school expenditure rises while discounts to ability in the highest quality private school are little affected by changes in public school expenditure expenditure in private schools rises as expenditure in public schools increases these empirical results are consistent with the predictions of the theoretical model

immigration and spending on public education california 1970 2000 abstract the evolution of education spending in california has received plenty of attention from both academics and practitioners after this state s education finance reform in the 1970 s this paper quantifies the contribution of immigration to the relative decline in elementary and secondary public education spending per student in california in the period 1970 2000 a quantitative model of school choice and voting over public education is used to perform the counterfactual experiments of interest the model predicts that education spending per student in california would have been 24 higher in the year 2000 if u s immigration had been restricted to its 1970 level

the effects of school spending on educational and economic outcomes evidence from school finance reforms since the coleman report many have questioned whether public school spending affects student outcomes the school finance reforms that began in the early 1970s and accelerated in the 1980s caused dramatic changes to the structure of k 12 education spending in the united states to study the effect of these school finance reform induced changes in public school spending on long run adult outcomes we link school spending and school finance reform data to detailed nationally representative data on children born between 1955 and 1985 and followed through 2011 we use the timing of the passage of court mandated reforms and their associated type of funding formula change as exogenous shifters of school spending and we compare the adult outcomes of cohorts that were differentially exposed to school finance reforms depending on place and year of birth event study and instrumental variable models reveal that a 10 increase in per pupil spending each year for all 12 years of public school leads to 0 31 more completed years of education about 7 higher wages and a 3 2 percentage point reduction in the annual incidence of adult poverty effects are much more pronounced for children from low income families exogenous spending increases were associated with notable improvements in measured school inputs including reductions in student to teacher ratios increases in teacher salaries and longer school years jel codes j10 i20 h7

effect of constraints on tiebout competition evidence from a school finance reform abstracteffect of constraints on tiebout competition evidence from a school finance reform regional studies michigan s school finance reform significantly increased state aid to low spending districts and placed restraints on the growth of spending in high spending districts it is noteworthy that there is no literature yet on the impact of such reforms on resource allocation by school districts this study begins to fill this gap it finds that the reform led the high spending districts to allocate a lower share of their total expenditure to support services and a higher share to instruction relative to the low spending districts to the extent that instructional expenditures are more productive and contribute to student achievement more than support services expenditures these results suggest that the reform led to a relative increase in productivity in the high spending districts

the rational design of international institutions international institutions are central features of modern international relations this is true of trade international debt and financial restructuring and even national security once the exclusive realm of pure state action it was certainly true of the two major military engagements of the 1990s the wars in kosovo and the persian gulf as international institutions have gained prominence in the political landscape they have increasingly become prominent topics for study the sharpest debate among researchers has been theoretical do international institutions really matter missing from this debate is a sustained inquiry into how these institutions actually work we shift the focus by posing researchable questions about how they operate and how they relate to the problems states face we begin with a simple observation major institutions are organized in radically different ways some are global essentially open to all states others are regional with restricted memberships some institutions give each state an equal vote whereas others have weighted voting and sometimes require supermajorities institutions may have relatively strong central authorities and significant operating responsibilities or be little more than forums for consultation some arrangements for example most bilateral treaties have no formal organizational structure these are plentiful because states have a striking tendency to codify their relationships in formal legal arrangements why do these differences exist do they really matter both for members and for international politics more generally do they affect what the institutions themselves can do we focus on these large questions of institutional design

economic science an experimental approach for teaching and research economics experiments have been used to study theories and policies that are often difficult to evaluate with data from naturally occurring markets this paper is a selective summary of my work in the main areas of experimental economics markets individual decisions games and public choice the discussion pertains both to scientific discoveries and teaching innovations

a theory of distributional conflict voluntarism and segregation along with the rise in income inequality in the us there is evidence of a simultaneous move towards fiscal devolution and increased government reliance on private provision of public goods this article argues that these phenomena are related we describe a model of jurisdiction and policy formation in which the structure of government provision is endogenous and public good provision levels are determined by a political process that can exploit private motives for voluntary giving the model predicts that an increase in income inequality leads to decentralisation with local jurisdictions becoming more income homogeneous than the population as a whole this reduction in local income heterogeneity combined with a reduced tax base results in increased reliance by government on private provision

a brief empirical note on the tiebout hypothesis and state income tax policies some years ago tiebout 1956 418 hypothesized that the consumervoter may be viewed as picking that community which best satisfies his preference pattern for public goods the consumer voter moves to that community whose local government best satisfies his set of preferences based upon this argument by tiebout this brief note seeks to empirically examine the impact of state income tax policy upon the geographic mobility of consumer voters in the united states more specifically we attempt to determine whether the existence of a state income tax significantly influences the in migration of consumer voters naturally the analysis includes suitable non tax control variables to reflect other factors which may influence the migration decision calculus

using nash bargaining to design project management contracts under cost uncertainty abstract in the design of procurement contracts cost sharing wherein the contractor receives a fixed fee plus a fraction of his cost is common when the cost for completing the project is uncertain we determine the best cost sharing contract between a risk neutral project manager and a risk averse contractor when negotiation proceeds in accord with nash bargaining we examine the characteristics of the contract when the contractor can invest to reduce the mean and or the uncertainty of the project cost we show that cost plus contracts dominate fixed price contracts as well as all other cost sharing contracts in order to extend our analysis to the case when the value of the project itself is uncertain we employ the recent method of embedded nash bargaining finally we generalize our main result by allowing an asymmetric nash bargaining solution

education finance reform and the distribution of education resources between 1971 and 1996 opponents of local funding for public schools successfully challenged the constitutionality of school finance systems in sixteen states using the variation across states in the timing of these cases the authors investigate the impact of reform on the distribution of school resources their results suggest that court ordered finance reform reduced within state inequality in spending by 19 to 34 percent successful litigation reduced inequality by raising spending in the poorest districts while leaving spending in the richest districts unchanged thereby increasing aggregate spending on education reform led states to fund additional spending through higher state taxes copyright 1998 by american economic association

selling two environmental services in kind payments for bird habitat and watershed protection in los negros bolivia abstract marketing several environmental services from a single area can help access diverse sources of funding and make conservation a more competitive land use in bolivia s los negros valley department of santa cruz bordering the amboro national park 46 farmers are currently paid to protect 2774 ha of a watershed containing the threatened cloud forest habitat of 11 species of migratory birds in this payment for environmental services pes scheme annual contracts prohibit tree cutting hunting and forest clearing on enrolled lands farmer landowners as service providers submit to independent yearly monitoring and are sanctioned for non compliance facilitated by a local ngo fundacion natura bolivia one service buyer is an international conservation donor the us fish and wildlife service interested in biodiversity conservation the second service users are downstream irrigators who likely benefit from stabilized dry season water flows if upstream cloud forests are successfully protected individual irrigators have been reluctant to pay but the los negros municipal government has on their behalf contributed us 4500 to the scheme the negotiated payment mode is annual quid pro quo in kind compensations in return for forest protection predominantly payments are made as contingent project implementation transferring beehives supplemented by apicultural training with regard to service provision environment committees and education programs have increased awareness in downstream communities of the probable water supply reduction effect of continued upstream deforestation external donors have funded subsequent studies providing basic economic hydrological and biodiversity data and covered pes start up us 40 000 and running transaction costs us 3000 per year over the last three years the greatest challenges in the development of the pes mechanism have been the slow process of building trust between service buyers and providers and in achieving clear service provision additionality

on the political economy of zoning abstract households choose a community in a metropolitan area and collectively set a minimum housing quality and a property tax to finance a local public good the collective imposition of a lower bound on housing consumption induces an income stratified equilibrium in a specification where meaningful community differentiation would not arise without zoning we show computationally that zoning restrictions are likely to be stringent with a majority facing a binding constraint in communities that permit it by inducing a stratified equilibrium zoning causes tiebout welfare gains in aggregate but with large welfare transfers relative to stratified equilibrium without zoning the zoning equilibrium is significantly more efficient as it reduces housing market distortions

black white achievement differences and governmental interventions the estimates in the study considered whether any of the governmental or family factors individually could explain the magnitude and pattern of black white achievement gaps neither the level nor the distribution of school spending appears to provide much explanation for the gaps school spending levels show little consistent impact with any indication of differential impact on blacks being small direct analyses of the effects of spending equalization on performance similarly show little impact on the other hand governmental intervention through integration programs appears potentially more important

a solution to the problem of externalities when agents are well informed the author describes a class of simple two stage mechanisms that implement efficient allocations as subgame perfect equilibria for economic environments involving externalities these mechanisms known as compensation mechanisms solve a wide variety of externalities problems including implementation of lindahl allocations regulation of monopoly and efficient solutions to the prisoner s dilemma copyright 1994 by american economic association

education spending in an aging america abstract in this paper we use a national panel of public school districts to study the impact of an aging population on public education spending in contrast to previous analyses that use state level data we find that the elderly have only a modest overall negative effect on education spending at the district level our results confirm however that a growing share of elderly at the state level tends to depress state spending on education these results are consistent with the hypothesis that the elderly believe only higher local spending is capitalized into house values

the economics of schooling production and efficiency in public schools n recent years public and professional interest in schools has been heightened by a spate of reports many of them critical of current school policy these policy documents have added to persistent and long standing concerns about the cost effectiveness and fairness of the current school structure and have made schooling once again a serious public issue as in the past however any renewed interest in education is likely to be short lived doomed to dissipate as frustration over the inability of policy to improve school practice sets in this frustration about school policy relates directly to knowledge about the educational production process and in turn to underlying research on schools although the educational process has been extensively researched clear policy prescriptions flowing from this research have been difficult to derive 2 there exists however a consistency to the research findings that does have an immediate application to school policy schools differ dramatically in quality

incentive contracts and competitive bidding an increasing segment of economic activity is taking place in nonmarket situations in which economic agents act outside the traditional markets or create markets to deal with specific resource allocation problems one such problem involves the selection by a buyer of a contractor using a competitive bidding process competitive bidding is used extensively by the government for the selection of suppliers of goods and services and for the sale of resources such as offshore oil leases firms may use competitive bidding for the selection of certain suppliers of factor inputs and may attempt to sell certain products in markets in which competitive price quoting is the established market mechanism this paper is concerned with a bidding process in which a firm has an opportunity to bid on a project under the terms of an incentive contract incentive contracts

an experimental study of the holdout problem in a multilateral bargaining game abstract when an economic exchange requires agreement by multiple independent parties the potential exists for an individual to strategically delay agreement in an attempt to capture a greater share of the surplus created by the exchange this holdout problem is a common feature of the land assembly literature because development frequently requires the assembly of multiple parcels of land we use experimental methods to examine holdout behavior in a laboratory bargaining game that involves multi person groups complementary exchanges and holdout externalities the results of six treatments that vary the bargaining institution number of bargaining periods and the cost of delay demonstrate that holdout is common across institutions and is on average a payoff improving strategy for responders both proposers and responders take a more aggressive initial bargaining stance in multi period bargaining treatments relative to single period treatments but take a less aggressive bargaining stance when delay is costly nearly all exchanges eventually occur in our multi period treatments leading to higher overall efficiency relative to the single period treatments both with and without delay costs

does parents money matter abstract this paper asks whether parents income per se has a positive impact on children s abilities previous research has established that income is positively correlated across generations this does not prove that parents money matters however since income is presumably correlated with ability this paper estimates the impact of parents income by focusing on income variation due to factors union industry and job loss that arguably represent luck i find that changes in parents income due to luck have a negligible impact on children s human capital for most families although parents money does matter for families whose father has low education

wages rents and the quality of life this study focuses on the role of wages and rents in allocating workers to locations with various quantities of amenities the theory demonstrates that if the amenity is also productive then the sign of the wage gradient is unclear while the rent gradient is positive the theory is extended to include the housing market and nontraded goods these extensions require little modification of the conclusion the empirical work on wages shows that the regional wage differences can be explained largely by these local attributes with the use of site price data implicit prices are estimated and quality of life rankings for the cities are computed

non cooperative bargaining theory an introduction the paper provides an informal introduction to some of the main themes of the recent literature on non cooperative or sequential bargaining models it focuses in particular on the relationship between the new approach and the traditional axiomatic approach exemplified by nash bargaining theory it illustrates the new insights offered by the non cooperative approach by reference to a detailed analysis of the manner in which the presence of an outside option available to one of the parties will affect the negotiated outcome finally the difficulties which arise in extending this analysis to two person bargaining with incomplete information and to n person bargaining are discussed this is a revised version of the fourth review of economic studies lecture presented in april 1985 at the joint meeting of the association of university teachers of economics and the royal economic society held in oxford the choice of lecturer is made by a panel whose members are currently professors hahn mirrlees and nobay and the paper is refereed in the usual way this paper aims to provide an informal and elementary introduction to an approach to bargaining which has received a great deal of attention over the past few years the approach involves writing down some particular sequence of moves offers and replies to be made over time in the course of negotiations and then looking for a non cooperative equilibrium in the game thus specified in practice a perfect equilibrium or in games of incomplete information a sequential equilibrium while the approach appears at first sight to be very different in spirit from the traditional axiomatic approach in which a bargaining solution is specified by appealing to a number of general requirements which are deemed appropriate on the basis of some a priori considerations the two approaches are in fact complementary while the

how did the increase in economic inequality between 1970 and 1990 affect children s educational attainment 1 this study estimates the effect of changes in economic inequality between 1970 and 1990 on children s educational attainment data on individual children from the panel study of income dynamics is combined with other data on state characteristics growing up in a state with widespread economic inequality increases educational attainment for high income children and lowers it for low income children most of the effect is due to factors unassociated with family income or economic segregation in the state these other factors include state spending for schooling and the increase in the returns to schooling over this period

ex post information in auctions assumptions maskin and riley 1984 show that when the amount a buyer is willing to pay for the auctioned object is not independent of his wealth expected revenue tends to be lower under open bidding in contrast milgrom and weber 1982 relax the assumption that valuations are independent and assume instead that buyers private estimates of the item s value are affiliated a buyer with a high estimate then tends to believe that other buyers will have higher estimates as well maintaining the other assumptions milgrom and weber show that expected revenue is higher in the open ascending bid auction the intuition behind this result is that in sealed high bid auctions a buyer s bid is determined not only by his own beliefs but via their bids by the beliefs of those with lower estimates a buyer with a low estimate believes that others are more likely to have low estimates as well he therefore bids less aggressively it follows that a buyer can beat all opponents who have lower estimates with a bid which is lower than it would be if beliefs were independent 2 milgrom and weber also show that if the seller purchases and then publicly reveals information which is positively linked to buyers valuations this also raises expected gross revenue from an auction the intuition here is that this helps to reduce the difference in bidders willingness to pay 3 that such a reduction should raise expected revenue is easily understood for the limiting case in which the seller s information includes all the buyers private information for then all buyer asymmetry is eliminated and so expected buyer profit is bid away to zero the seller therefore reaps the entire surplus in the following pages the implications of correlated signals are further explored while milgrom and weber emphasized the potential gains to a seller who reveals information ex ante the focus here is on ex post information in section 2 it is shown that under weak assumptions the sealed high bid auction is dominated by any auction

does school quality matter returns to education and the characteristics of public schools in the united states this paper estimates the effects of school quality measured by the pupil teacher ratio average term length and relative teacher pay on the rate of return to education for men born between 1920 and 1949 using earnings data from the 1980 census we find that men who were educated in states with higher quality schools have a higher return to additional years of schooling rates of return are also higher for individuals from states with better educated teachers and with a higher fraction of female teachers holding constant school quality measures however we find no evidence that parental income or education affects average state level rates of return

climate clubs overcoming free riding in international climate policy notwithstanding great progress in scientific and economic under standing of climate change it has proven difficult to forge inter national agreements because of free riding as seen in the defunct kyoto protocol this study examines the club as a model for international climate policy based on economic theory and empirical modeling it finds that without sanctions against non participants there are no stable coalitions other than those with minimal abatement by contrast a regime with small trade penalties on non participants a climate club can induce a large stable coalition with high levels of abatement jel q54 q58 k32 k33

public private partnerships stimulating competition in a dynamic market this paper sets forth a public private partnership competition policy that mitigates the appropriability problems associated with innovation that occur in a dynamic market when competitive pressures are present we illustrate the applicability of our policy proposal using the results from an analysis of research projects jointly funded by the advanced technology program atp and the private partners our analysis illustrates that in the absence of atp funding these projects would not have been undertaken by private sector firms and that the social rate of return from the projects is substantial we also posit a mechanism whereby atp or any public agency can partner with industry to ensure that its public funds are being efficiently allocated

the impact of entitlements and equity on cooperative bargaining an experiment i introduction we consider a set of bargaining situations in which the disagreement outcome or backstop b is chosen by a third party for example a government agency may signal that it will adopt as policy any agreement that stakeholders reach among themselves but that otherwise it will impose a policy of its own choosing 1 or an arbitrator may announce the award that will be imposed if a union and employer fail to reach agreement on a new contract of particular interest are those situations in which the status quo allocation of resources q is pareto inferior to the imposed backstop although axiomatic models of cooperative bargaining kalai and smorodinsky 1975 nash 1950 presume that negotiators in such cases will condition their agreements on b and ignore q literatures on entitlements and focal points bazerman 1985 nozick 1974 suggest that history matters that is bargainers may be influenced by the status quo entitlement even when it lies outside the set of outcomes that are pareto superior to the backstop in addition the experimental literature on inequality aversion e g fehr and schmidt 1999 hoffman and spitzer 1985 nydegger and owen 1975 suggests that negotiators may be attracted to outcomes that equalize gains in this article we use a laboratory experiment to test the standard cooperative entitlement and egalitarian hypotheses in a multidimensional bargaining game we begin in section ii by describing a two party two attribute bargaining space based on the classic edgeworth box drawing from the literature on cooperative bargaining we initially hypothesize that 1 the parties will reach an agreement and that this agreement will be 2 pareto efficient 3 pareto superior to the backstop and 4 at the nash bargain as alternatives to 3 and 4 we consider two predictions from the literatures on entitlements focal points and inequality aversion these are that the agreements that parties reach will 5 be conditioned on the status quo allocation rather than the backstop and 6 equalize the parties payoffs when the nash bargain does not in section iii we describe the design of a laboratory experiment in free form cooperative bargaining to test these hypotheses our design does not use the one dimensional mechanisms usually employed to analyze bargaining outcomes such as dictator divide the pie or ultimatum games these mechanisms offer few opportunities for subjects to choose outcomes that are inefficient or pareto inferior to the backstop nor a clear method of differentiating the status quo allocation from the backstop instead we employ an edgeworth box game involving two subjects with cobb douglas payoff functions over two goods x and y we impose a pareto inefficient backstop allocation of these goods and allow our subjects to negotiate a reallocation if they reach an agreement each party receives the associated value from his or her payoff table otherwise each receives the payoff associated with the backstop each party s payoff table has roughly 200 possible combinations of x and y over which he or she can bargain in section iv we present our results we find that agreement rates are high and that those agreements are mostly in or close to the pareto efficient set the nash bargain however is only supported when it equalizes the value of subjects payoffs when the pareto efficient equal payoff outcome differs from the nash bargain subjects tend to compromise between the two allocations some even agreeing to allocations that are pareto inferior to the backstop we also find that the tendency of subjects to choose the equal payoff outcome is strengthened when they perceive that the status quo distribution had also been equitable section v concludes the article with a discussion of the implications of our findings ii hypotheses we motivate our design with an environmental example drawn from collaborative bargaining over the use of public lands

unintended consequence of centralized public school funding in michigan education 1 introductionin an effort to create greater equity among school districts a number of states have shifted the responsibility for school funding from local school districts to the state although many researchers have found that centralizing funding for public schools has been successful in creating greater equity murray evans and schwab 1998 moser and rubenstein 2002 other researchers have pointed out that centralizing funding can lead to unintended consequences for example fischel 1989 1992 suggests that families in wealthier districts which have a stronger demand for education are no longer able to match their preference for education under a system of equalized funding in some cases this may drive parents to seek private school alternatives downes and schoeman 1998 1 in other cases families meet their preferences by making private contributions to public schools sonstelie and brunner 1997 furthermore theobald and picus 1991 argue that centralizing funding forces education as a state service to compete with other state services for funds and as a result the growth rate of spending per pupil decreases over time 2 these articles illustrate that policies designed to centralize control of public school funding can produce unintended consequences in this article we introduce into the literature an additional consequence caused by centralizing control of school funding we argue that centralized control of public school funding with the objective to equalize operating expenditures i e salaries supplies and other ongoing expenses across school districts while leaving capital acquisitions i e purchases of school buildings and other facilities under local control results in resource rich school districts becoming more reliant on debt financing 3 we find empirical support for this theory using data in the state of michigan during its transition to a centralized school financing system in 1994 in the next section we present an overview of michigan s move to a centralized funding policy in the third section we present the regression model used to test the theory followed by the description of the data and the estimated results the final section of the study summarizes our findings 2 overview of michigan s educational systemin 1993 a legislative anomaly lead to an abrupt change in the method of financing public education in michigan prior to 1993 michigan had one of the most locally controlled school systems in the united states over 65 of school operating expenditures came from local revenues whereas the remaining 35 were derived from state and federal sources courant gramlich and loeb 1995 property owners argued that local reliance on property taxes created an excessive burden and voiced their complaints to state representatives attempts to lower these taxes were defeated annually until debbie stabenow a democrat senator and candidate for governor frustrated with the tax debate proposed an absurdity to eliminate all property taxes without suggesting an alternative funding mechanism courant and loeb 1997 astonishingly the legislature passed her bill leaving the public school system with no means of funding seizing an opportunity to create greater equity among school districts michigan officials quickly devised a centralized system of financing public school operations known as proposal a that reduces districts reliance on local property taxes by increasing the state s sales tax integrated into proposal a is a distribution formula that reduces the disparity in operating expenditures across high and low spending school districts in part by constraining the allocation of operating funds for high spending districts however proposal a does not affect local control of funding for capital projects watkins 2002 michigan s state operating budget typically provides less than 5 of the total revenue needed to service school debt and no revenue for capital expenditures

the history of ecosystem services in economic theory and practice from early notions to markets and payment schemes article i nfo this paper reviews the historic development of the conceptualization of ecosystem services and examines critical landmarks in economic theory and practice with regard to the incorporation of ecosystem services into markets and payment schemes the review presented here suggests that the trend towards monetization and commodification of ecosystem services is partly the result of a slow move from the original economic conception of nature s benefits as use values in classical economics to their conceptualization in terms of exchange values in neoclassical economics the theory and practice of current ecosystem services science are examined inthelight ofthis historicaldevelopment from thisreview we conclude thatthefocus onmonetary valuation and payment schemes has contributed to attract political support for conservation but also to commodify a growing number of ecosystem services and to reproduce the neoclassical economics paradigm and the market logic to tackle environmental problems

you can take it with you proposition 13 tax benefits residential mobility and willingness to pay for housing amenities abstract the endogeneity of prices has long been recognized as the main identification problem in the estimation of marginal willingness to pay mwtp for the characteristics of a given product this issue is particularly important in the housing market since a number of housing and neighborhood features are unobserved by the econometrician this paper proposes the use of a well defined type of transaction costs moving costs generated by property tax laws to deal with this type of omitted variable bias california s proposition 13 property tax law is the source of variation in transaction costs used in the empirical analysis beyond its fiscal consequences proposition 13 created a lock in effect on housing choice because of the implicit tax break enjoyed by homeowners living in the same house for a long time its importance to homeowners is estimated from a natural experiment created by two amendments that allow households headed by an individual over the age of 55 to transfer the implicit tax benefit to a new home indeed 55 year old homeowners have 25 higher moving rates than those of comparable 54 year olds these transaction costs from the property tax laws are then incorporated into a household sorting model the key insight is that because of the property tax laws different potential buyers may have different user costs for the same house the exogenous property tax component of this user cost is then used as an instrumental variable i find that mwtp estimates for housing characteristics are approximately 100 upward biased when the choice model does not account for the price endogeneity

the legacy of serrano the impact of mandated equal spending on private school enrollment 1 introduction the california supreme court decision in serrano v priest in 1971 was the first state supreme court ruling to declare a state s education finance system unconstitutional 1 the suit originally filed by a class of los angeles county public school children and their parents argued that the california public school finance system was unconstitutional because of its reliance on a local property tax system under this system large differences in property wealth created enormous variations in educational resources across the state in its subsequent 1976 serrano h decision the california supreme court found that the state legislature s response to the first serrano decision was insufficient the court ordered the state legislature to follow a trial court s requirement to implement a funding formula that reduces wealth related per pupil expenditure disparities i e property tax revenue exclusive of categorical aid and special needs to 100 across school districts the serrano ii decision resulted in a nearly complete shift of the fiscal responsibility for k 12 education in california from local to state government in the aftermath of the initial serrano decision suits were filed in several other states claiming unconstitutional inequities in the state education system many of these suits were successful between 1973 and 1983 six state supreme courts new jersey 1973 connecticut 1977 washington 1978 west virginia 1979 wyoming 1980 arkansas 1983 found their systems of educational finance unconstitutional similar rulings followed in 1989 in kentucky montana and texas in 1993 in massachusetts and tennessee in 1994 in arizona and in 1997 in new hampshire ohio and vermont a third of the states education finance systems now have been ruled unconstitutional as a result of these rulings and legislative based education reforms in a number of other states education expenditure inequality has been reduced 2 this in turn has left local districts with less latitude in determining spending levels parents in richer districts are expected to be especially frustrated with the limits on spending that accompany equalization changes in state educational finance systems to gain greater equity affected average spending on education in these states the initial research on this issue focused on the california experience where raw expenditure figures reveal the dramatic change in per pupil spending in california since the initial serrano decision in 1971 in academic year ay 1969 1970 per pupil spending in california s public elementary and secondary schools was slightly greater than the national average 106 25 of the national average ranking 14th among all states however by ay 1992 1993 education expenditures in california had fallen to 85 6 of the national average and its rank had dropped to 34th silva and sonstelie 1995 concluded that education spending in california in 1989 1990 was significantly lower than they would have otherwise predicted they attributed about half of the lowered spending to the legislation following serrano ii and the other half to the growth of the student population in california but the california experience of reduced expenditures appears to be atypical manwaring and sheffrin 1997 found spending to be higher in many states as a result of litigation or legislativebased educational finance reform downes and shah 1995 similarly estimated that school finance reform raised spending in some states and lowered spending in other states murray evans and schwab 1998 found state per pupil spending rose with successful state education finance litigation the variation across states in the spending effects of education finance reforms may be due to the source court ordered or legislative and or degree e g weak reform strong reform etc of the reforms in any case there should be greater interest in supplementing what the public schools do or opting out of the public system if reforms cause spending in a state to fall

a profit sharing scheme for a two firm joint venture consider the scenario when two firms are setting up a joint venture one firm has a set of technologies and knowhow for a new product while the other contributes the necessary capital for setting up and running the venture the key issue that the two firms face in negotiating the joint venture is to determine a fair value for the technologies and knowhow this paper presents an approach by which each firm bids a price for the technology with an objective to maximize their own profits from the joint venture provided that their bids satisfy a cooperation condition the two firms settle on a price using a simple valuation formula we analyze the impact of various factors on the decision process and provide numerical results to illustrate the bidding strategies we conclude that in order to maximize their profits it is often more important for both firms to increase the chance of cooperation than to increase their own shares of the joint venture

the political economy of school choice linking theory and evidence abstract we derive an improved methodology for linking theoretical parameters of a political economy model of school choice to empirical values estimated by regressing local private enrollment shares on mean income the median to mean ratio religious and ethnic composition and other variables this leads us to reject the commonly maintained assumption that a coalition of ends against the middle determines local school funding and to conclude instead that the median income voter is decisive it also allows us to estimate the perceived relative efficiency advantage of private schooling which we find to be about 30 at the margin

legal constraints and the choice of educational grant structures recent empirical work suggests that legalconstraints are significant in choosingstate educational grant structures unfortunately the literature has not takensuch constraints into account thus callinginto question particular grant structurerecommendations this paper studies theconditions under which a legislature underorder to reform its educational grantstructure prefers foundation grants overdistrict power equalization grants atheoretical model is presented in which thechoice is shown to depend on the legalbasis of the court s decision and theempirical validity of this conclusion isdemonstrated using connecticut data and aseparate model of school districtexpenditure choice

assessing the importance of tiebout sorting local heterogeneity from 1850 to 1990 this paper argues that long run trends in geographic segregation are inconsistent with models where residential choice depends solely on local public goods the tiebout hypothesis we develop an extension of the tiebout model that predicts as mobility costs fall the heterogeneity across communities of individual public good preferences and of public good provision must weakly increase given the secular decline in mobility costs these predictions can be evaluated using historical data we find decreasing heterogeneity in policies and proxies for preferences across i a sample of u s municipalities 1870 1990 ii all boston area municipalities 1870 1990 and iii all u s counties 1850 1990

simple probability models for project contracting there are two aspects to the process of price setting using sealed bids the project owner is interested in deploying the contract mechanism that will secure reliable service at the cheapest cost on the other hand each contractor bidding for the project is interested in winning the contract but at a price that assures him a reasonable profit margin we use a parsimonious stochastic model to compare and contrast some commonly used contracts from the point of view of the project owner we show that if the bidders are risk neutral a fixed price contract results in the smallest expected procurement cost for the project owner we introduce and analyze menu contracts and show that the expected price of a menu contract lies in between the prices of the fixed price and cost plus contracts for the same project we analyze how risk aversion and collusion which we model using concepts of stochastic dependence impacts the average winning bid price

the relation between variance and information rent in auctions abstract this paper examines the conventional wisdom expressed in mcafee and mcmillan s 1987 widely cited survey paper on auctions that links increased variance of bidder values to increased information rent we find that although the conventional wisdom does indeed hold in their 1986 model of a linear contract auction this relationship is an artifact of that particular model and cannot be generalized using samuelson s 1987 model which is similar but allows for unobservable costs we show that increased variance does not always imply increased information rent finally we give the appropriate measure of dispersion different from variance that provides the link between the bidder value distribution and information rent

property taxes and elderly mobility abstract the 2000 2005 housing market boom in the u s has caused sharp increases in residential property taxes housing rich but income poor elderly homeowners often complain about rising tax burdens and anecdotal evidence suggests that some move to reduce their tax burden there has been little systematic analysis however of the link between property tax levels and the mobility rate of elderly homeowners this paper investigates this link using household level panel data from the health and retirement study hrs and a newly collected data set on state provided property tax relief programs these relief programs generate variation in effective property tax burdens that is not due solely to arguably endogenous local community choices about taxes and expenditure programs the findings provide evidence suggesting that higher property taxes raise mobility among elderly homeowners the point estimates from instrumental variable estimation using relief programs to generate instruments suggest that a 100 increase in annual property taxes is associated with a 0 73 percentage point increase in the 2 year mobility rate for homeowners over the age of 50 this is an 8 percent increase from the baseline 2 year mobility rate of 9 percent these results are robust to alternative specifications

political economy of the inequality in school spending abstract this paper employs data from 45 states between 1972 and 1992 to investigate the basic forces affecting school resource inequality within a state we consider a wide range of determinants of inequality including voter preferences the tax and political structure within the state and the legal standing of education within the state constitution we find that state constitutional language regarding equity affects the degree of school spending equality in the state as does the political environment in the state and factors associated with the benefits and costs of tiebout sorting into school districts

the impact of information provision on agglomeration bonus performance an experimental study on local networks the agglomeration bonus is an incentive mechanism to induce adjacent landowners to spatially coordinate their land use for the delivery of ecosystem services from farmland this paper uses laboratory experiments to explore the performance of the agglomeration bonus in achieving the socially optimal land management configuration in a local network environment where the information available to subjects varies and the strategic setting is unfavorable for efficient coordination the experiments indicate that if subjects are informed about both their direct and indirect neighbors actions they are more likely to produce the socially optimal configuration thus effectiveness of the policy can be improved by implementing information dissemination exercises among landowners however given the adverse strategic setting increased game experience leads to coordination failure and optimal land choices only at the localized level independent of the information available to subjects thus success of the agglomeration bonus scheme on real landscapes will have to take account of the roles of both information and experience on participant behavior

federalism fertility and growth this paper analyses the effect of federalism on fertility and growth in a model with human capital accumulation and endogenous fertility two regimes of education finance are compared central and local i find that local education finance yields higher growth at the price of increased inequality the effect of federalism on total and differential fertility rates depends on the elasticity of substitution between children and consumption the paper also empirically examines the relationship between fertility rates and fiscal decentralisation on a panel of oecd countries and finds a weak negative effect of decentralisation on total and differential poor minus rich fertility

the effect of state education finance reform on total local resources abstract both the federal government and the states use intergovernmental grants to try to change the composition of local spending across different programs as well as the distribution of resources across localities many states are now under court order to use state education grants to reduce local disparities in education spending while a substantial body of literature suggests that these court orders increase the level and progressivity of state education spending there is little evidence on their broader effects on the total resources available not just for schools in low income districts but for other programs across all localities we find that states finance the required increase in education spending in part by reducing their aid to localities for other programs particularly for wealthier areas thus while court ordered school finance equalizations do increase total state aid to localities for education they do so at the expense of drawing state intergovernmental aid away from programs like public welfare health hospitals and general services these findings provide insight into the effectiveness of using earmarked funds to achieve redistribution

competition in the economic crisis analysis of procurement auctions we study the effects of the recent economic crisis on firms bidding behavior and markups in sealed bid auctions using data from austrian construction procurements we estimate bidders construction costs within a private value auction model we find that markups of all bids submitted decrease by 1 5 percentage points in the recent economic crisis markups of winning bids decrease by 3 3 percentage points we also find that without the government stimulus package this decrease would have been larger these two pieces of evidence point to pro cyclical markups

effects of ambiguity in market experiments prior studies have shown that individuals are averse to ambiguity in probability many decisions are however made in market settings where an individual s decision is influenced by decisions of others participating in the market in this paper we extend the previous research to evaluate the effect of ambiguity on individual decisions and the resulting market price in market settings we therefore examine an important issue whether ambiguity effects persist in the face of market incentives and feedback two different market organizations the sealed bid auction and the double oral auction were employed the subjects in the experiments were graduate business students and bank executives our results show that the individual bids and market prices for lotteries with ambiguous probabilities are consistently lower than the corresponding bids and market prices for equivalent lotteries with well defined probabilities the aversion to ambiguity therefore does not vanish in market settings our results provide insights into what a manager can expect in bidding situations where the object of the sale oil leases mineral rights involves ambiguity in probability due to for example lack of information or prior experience the results may also be useful in understanding some phenomena in insurance and equity markets

welfare policies and migration of the poor in the united states an empirical note this paper has investigated the impact of geographic welfare benefit differentials upon migration in the united states unlike other related studies which typically focus upon black migration as a surrogate measure of migration of the poor the present study focuses directly upon migration of the poor per se a variety of reduced form estimates are provided the evidence strongly suggests that the net in migration of the poor is positively and significantly influenced by higher nominal afdc levels and by higher real afdc levels these findings support the welfare magnet hypothesis which alleges that relatively high welfare levels act to attract poor migrants moreover given that poor migrants are attracted non only by high nominal welfare levels but also by high real welfare levels an argument can be made for establishing geographically uniform real welfare benefit levels in the united states this uniformity presumably should act over the long run to eliminate the human resource distortions being caused by the currently prevailing welfare system

changing roles of ability and education in u s intergenerational mobility using data on young adults from the 1979 and 1997 national longitudinal survey of youth we investigate the changing roles of ability and education in the transmission of economic status across generations we find that ability plays a substantially diminished role for the most recent cohort whereas education plays a much larger role the first finding results primarily from a smaller effect of children s ability on status the second from an increased correlation between parental status and educational attainment a replication of the analysis by gender reveals that the changes in the role of ability are largely driven by men whereas the changes in education s role are largely driven by women jel j62 i24

estimating the effects of school finance reform a framework for a federalist system abstract this paper models the effect of increased state involvement in school funding on education spending levels unlike previous studies that have assumed perfect sorting of voters into districts by income this analysis assumes demand sorting i thus am able to utilize the true distribution of wealth across districts to estimate tax price changes and to predict changes in district spending levels in response to a change in financing rules i look specifically at three types of state funding programs those in which districts receive a set per pupil grant from the state and are not allowed to raise additional funds those in which districts are allowed to raise unlimited additional funds and those in which this supplementation is capped both the model and the subsequent simulations indicate that the ostensible benefits of a system with unlimited local supplementation that it retains much local control over funding decisions on the margin while insuring an adequate level of financing for all districts may not be sustainable because high wealth districts have no incentive to support state funding additionally a system with no local supplementation may be politically difficult because it forces many voters far from their preferred spending levels capped supplementation provides a balance between local control and spending equity

addressing the collective action problem in multiple purchaser pes an experimental investigation of negotiated payment contributions this project was carried out as part of the defra payments for ecosystem services pes pilot research projects river fowey improvement scheme ne0131 it was also supported by a university of east anglia studentship funding support is gratefully acknowledged

using market valuation to assess public school spending abstract we examine whether school expenditures are valued by potential residents and whether the current level of public school provision is inefficient by estimating the effect of state education aid on residential property values we find evidence that overall state aid is valued by potential residents and that school districts do not overspend on education however we find that districts may overspend in areas where residents have fewer schooling options but find no difference in efficiency by the degree of district unionization one interpretation of these results is that increased competition may reduce overspending on public schools in some areas

the intergenerational conflict over the provision of public education abstract we study the intergenerational conflict over the provision of public education this conflict arises because older households without children have weaker incentives to support the provision of high quality educational services in a community than younger households with school age children we develop an overlapping generations model for households in a system of multiple jurisdictions this model captures the differences in preferred policies over the life cycle we show that the observed inequality in educational policies across communities is not only the outcome of stratification by income but is also determined by the stratification by age and a political process that is dominated by older voters in many urban communities with low quality of educational services the mobility of older households creates a positive fiscal externality since it creates a larger tax base per student this positive tax externality can dominate the negative effects that arise because older households tend to vote for lower educational expenditures as a consequence sorting by age can reduce the inequality in educational outcomes that is driven by income sorting

the effects of spending on test pass rates evidence from michigan abstract this study uses data on standardized test scores from 1992 through 1998 at michigan schools to determine the effects of spending on student performance the years in the data set straddle 1994 when michigan dramatically changed the way that k 12 schools are funded and moved toward equalization of spending across schools focusing on pass rates for a fourth grade math tests the most complete and consistent data available for michigan i find that increases in spending have nontrivial statistically significant effects on math test pass rates and the effects are largest for schools with initially poor performance

all school finance equalizations are not created equal school finance equalization has probably affected american schools more than any other reform of the last 30 years understanding it is a prerequisite for making optimal social investments in human capital yet it is poorly understood in this paper i explain why it differs from conventional redistribution because it is based on property values which are endogenous to schools productivity taste for education and the school finance system itself i characterize equalization schemes and show why some level down and others level up schemes that strongly level down have unintended consequences even poor districts can end up worse off i also show how school finance equalization affects property prices private school attendance and student achievement

bidding for contests the procurement of product development and production services brings special strategic considerations to the buyer seller relationship in industrial and institutional markets multiple sourcing in particular dual sourcing is a likely way of dealing with the increased risks faced by buyers however there is lack of dual sourcing models that analyze the selection and control process in an integrated fashion this omission had led to apparently contradictory findings in agency and auction theory the paper models the strategic issues for a cost containment contest between two suppliers the suppliers are drawn from several vendors who participate in a bidding competition the supplier with the lower final cost in the contest wins a larger share of the pooled profit fee propositions are derived for the optimal cost plus contest and comparisons are made with the common incentive contract for the integrated selection and control model the larger the winner s share the greater the effort the buyer can make a credible commitment to the optimal winner s share as the winner s share rises however the bid prices increase due to increased contract risk this incentive risk tradeoff determines a the optimal winner s share that minimizes expected procurement price b the corresponding profit fee bid by suppliers c the ensuing cost control effort and d the final price for the procurement comparisons with the common incentive contract tell us when the cost plus contest induces more effort and when bidding for a contest results in a lower final procurement price

the effect of increased funding on student achievement evidence from texas s small district adjustment abstract we leverage an obscure set of rules in texas s school funding formula granting some districts additional revenue as a function of size and sparsity we use variation from kinks and discontinuities in this formula to ask how districts spend additional discretionary funds and whether these improve student outcomes a 1000 annual increase in foundation funding or 10 increase in expenditures yields a 0 1 s d increase in reading scores and a near 0 08 increase in math in addition dropout rates decline graduation rates marginally increase as does college enrollment and to a smaller degree graduation these gains accrue in later grades and largely among poorer districts an analysis of budget allocations reveals that additional funding only marginally affects budget shares

where does voucher funding go how large scale subsidy programs affect private school revenue enrollment and prices using a new dataset constructed from nonprofit tax returns this paper explores how vouchers and other large scale programs subsidizing private school attendance have affected the fiscal outcomes of private schools and the affordability of a private education we find that subsidy programs created a large transfer of public funding to private schools suggesting that every dollar of funding increased revenue by a dollar or more turning to the incidence of subsidies and the impact of subsidies on enrollment our findings depend on the type of program introduced programs that restrict eligibility to certain groups of students create large enrollment gains but no change in price while programs that offer unrestricted subsidies lead to price increases but no change in enrollment we calculate elasticities of demand and supply for private schools and discuss welfare effects

adapting auctions for the provision of ecosystem services at the landscape scale abstract auctions or competitive tenders can overcome information asymmetries to efficiently allocate limited funding for ecosystem services most auctions focus on ecosystem services on individual properties to maximise the total amount provided however for many services it is not just the total quantity but their location in the landscape relative to other sites that matters for example biodiversity conservation may be much more effective if conserved sites are connected adapting auctions to address ecosystem services at the landscape scale requires an auction mechanism which can promote coordination while maintaining competition multi round auctions in which bidding is spread over a number of rounds with information provided between rounds on the location of other bids in the landscape offer an approach to cost effectively deliver landscape scale ecosystem services experimental economic testing shows these auctions deliver the most cost effective environmental outcomes when the number of rounds is unknown in advance which minimises rent seeking behaviour it also shows that a form of bid improvement rule facilitates coordination and reduces rent seeking where the biophysical science is well developed such auctions should be relatively straightforward to implement and participate in and have the potential to provide significantly better outcomes than standard one shot tenders