reaction or interaction spatial process identification in multi tiered government structures abstract this paper models horizontal and vertical fiscal externalities in a multi tiered structure of government and implements maximum likelihood and instrumental variables estimation techniques to identify the source of spatial dependence in english local government expenditures the results show that when vertical fiscal externalities among upper tier county authority and lower tier district authority expenditures are explicitly taken into account the estimated magnitude of inter district fiscal interactions is substantially reduced the observed positive spatial autocorrelation among district expenditures can consequently be attributed to a large extent to common reaction to county fiscal policies rather than to actual strategic interaction

tax competition in federations and the welfare consequences of decentralization abstract this paper explores the impact of intensified tax competition within federal systems characterized by the presence of both horizontal tax externalities between the states and vertical tax externalities between states and federal government it shows that although these push tax rates in opposite directions horizontal towards state taxes that are too low vertical towards state taxes that are too high leaving the net outcome unclear intensified tax competition always worsens their combined effect that is intensified lower level tax competition in the form of an increase in the number of lower level jurisdictions is sure to reduce welfare but this is not because as usually supposed it makes excessively low state taxes even lower rather it is welfare reducing either for that reason or because it makes excessively high state taxes even higher

corruption and government size a disaggregated analysis using annual state level data over 1983 1987 this paper examines the effect of government size on corruption by public officials by including both demand and supply side incentives for engaging in corrupt practices our objectives are twofold first we assess the relationship between the incidence of corruption and overall measures of the size of the federal government and the state local sector in each state second we explore what kinds of government activities are more likely to be successful in deterring abuse of public office our results are generally supportive of becker s crime and punishment model regarding the primary focus of the paper our results show that government size in particular spending by state governments does indeed have a strong positive influence on corruption

reducing bureaucratic corruption interdisciplinary perspectives on what works abstract this article offers the first comprehensive review of the interdisciplinary state of knowledge regarding anti corruption policies with a particular focus on reducing corruption among civil servants drawing on the work of economists political scientists sociologists and anthropologists we examine seven policy categories 1 rewards and penalties 2 monitoring 3 restructuring bureaucracies 4 screening and recruiting 5 anti corruption agencies 6 educational campaigns and 7 international agreements notably rigorous empirical evaluation is lacking for the majority of commonly prescribed anti corruption policies nevertheless we find growing evidence of the effectiveness of policies based on monitoring including anti corruption audits and e governance in addition adequate civil service wages seem to be a necessary but insufficient condition for control of corruption an emerging skepticism regarding the effectiveness of anti corruption agencies also is apparent in the literature we conclude with broader lessons drawn from our review such as the recognition that when corruption is a systemic problem it cannot be treated in the long term with individual level solutions

decentralization and corruption evidence from u s federal transfer programs while some recent evidence suggests that more decentralization is associated with reduced corruption no empirical work has examined whether different types of decentraliz ation have differential effects on corruption the theoretical literature has emphasized that expenditure decentralization will only be effective if accompanied by the devolution of rev enue generation to local governments in this paper we examine this hypothesis empirically by studying the mismatch between revenue generation and expenditure in u s states larger federal transfers are associated with higher rates of conviction for abuse of public office supporting the theory that soft budget constraints created by federal transfers are potentially problematic

pragmatic collaborations advancing knowledge while controlling opportunism this paper starts from the observation that firms are increasingly engaging in collaborations with their suppliers even as they are reducing the extent to which they are vertically integrated with those suppliers this fact seems incompatible with traditional theories of the firm which argue that integration is necessary to avoid the potential for hold ups created when non contractible investments are made our view is that pragmatist mechanisms such as benchmarking simultaneous engineering and root cause error detection and correction make possible learning by monitoring a relationship in which firms and their collaborators continuously improve their joint products and processes without the need for a clear division of property rights we argue that pragmatic collaborations based on learning by monitoring both advance knowledge and control opportunism and thus align interests between the collaborators copyright 2000 by oxford university press

corruption in america abstract we use a data set of federal corruption convictions in the u s to investigate the causes and consequences of corruption more educated states and to a smaller degree richer states have less corruption this relationship holds even when we use historical factors like congregationalism in 1890 as an instrument for the level of schooling today the level of corruption is also correlated with the level of income inequality and racial fractionalization and uncorrelated with the size of government there is a weak negative relationship between corruption and economic development in a state these results echo the cross country findings and support the view that the correlation between development and good political outcomes occurs because education improves political institutions

reassessment of the tiebout model abstract the tiebout model has been the reference point for the classical approach to fiscal federalism its emphasis on mobility benefit taxation and the advantages of fiscal competition have informed fiscal federalism since the seminal contributions of musgrave and oates this paper reviews the influence that the tiebout model has had on fiscal federalism and argues that while its insights remain relevant for local government it is far from compelling as a positive description of or a normative prescription for fiscal federalism at the state level some aspects of alternative approaches are presented which lead to different perspectives than tiebout inspired ones

upgrading in global value chains lessons from latin american clusters it has been shown that clustering helps local enterprises in industrial districts overcome growth constraints and compete in distant markets in advanced and less developed countries nevertheless recent contributions have stressed that more attention needs to be paid to external linkages and to the role played by global buyers to foster upgrading at cluster levels in this study we contribute to this debate focusing on the analysis of the relationships existing between clustering global value chains upgrading and sectoral patterns of innovation in latin america we find that sectoral specificities matter and influence the mode and the extent of upgrading in clusters integrated in global value chains

time and punishment an intertemporal model of crime if an increase in the rate at which a criminal commits crimes lowers the expected time until detection the income from crime net of expected fines must be discounted at a rate that varies with the crime rate this paper models the criminal s choice of the optimal crime rate under such conditions it is shown that irrespective of the criminal s attitude toward risk an increase in the probability of detection is more likely to deter crime than a comparable increase in penalties other implications of the model for the optimal enforcement of laws are also explored

one size fits all decentralization corruption and the monitoring of bureaucrats summary the majority of theoretical and empirical studies on the relationship between decentralization and corruption argue that the devolution of power might be a feasible instrument for use in keeping corruption at bay we argue that this result crucially depends on the effectiveness of monitoring bureaucrats behavior the benefits of decentralization only occur if there is a supervisory body such as a free press which is often lacking in a substantial number of countries using cross country data we analyze the relationship between decentralization and corruption taking different degrees of the freedom of the press into account our main finding is that decentralization counteracts corruption in countries with high degrees of freedom of the press whereas countries without effective monitoring suffer from decentralization our policy implication is that a free press is a necessary pre condition for successful decentralization programs

an empirical analysis of intergovernmental tax interaction the case of business income taxes in canada both federal and provincial governments in canada levy corporate taxes on busi nesses in their jurisdictions which potentially gives rise to horizontal and vertical tax exter nalities within the federation using a simple model of interdependent tax choices we estimate tax setting functions for the federal government ontario quebec and an aggregate of the remaining eight provinces we find evidence of significant vertical and horizontal tax inter actions provincial tax rates respond negatively to the federal tax rate while at least some provinces increase their tax rates in response to increases in the tax rates of other provinces

efficiency and environmental factors in the us electricity transmission industry the electricity industry in most developed countries has been restructured over recent decades with the aim of improving both service quality and firm performance regulated segments e g transmission still provide the infrastructure for the competitive segments and represent a significant share of the total price paid by final customers however there is a lack of empirical studies that analyse firms performance in the electricity transmission sector in this paper an empirical analysis of us electricity transmission companies is conducted for the period 2001 2009 we use alternative stochastic frontier models that allow us to identify the determinants of firms inefficiency these models also permit us to control for weather conditions potentially one of the most decisive uncontrollable factors in electricity transmission our results suggest that weather conditions clearly have an influence on transmission costs and that there is room for improvement in the management of us electricity transmission systems regulators should also be aware that more adverse conditions generate higher levels of inefficiency and that achieving long term efficiency improvements tends to worsen firms short term relative performance

vertical externalities in cigarette taxation do tax revenues go up in smoke abstract in federal systems where tax bases are joint property the tax policy of one level of government affects the tax base of the other this paper examines the interdependence of us federal and state cigarette tax rates our results suggest that states may reduce their cigarette tax rate by as much as 48 cents per dollar increase in the federal tax rate thus a federal tax hike may reduce the amount of generated state tax revenues both directly the overall tax rate rises and the state tax base declines and indirectly the state tax rate declines

collective learning in global diffusion spreading quality standards in a developing country cluster this research analyzes how foreign organizational practices diffuse among indigenous enterprises in a developing economy it highlights the collective knowledge building process as central for understanding diffusion based on a longitudinal case study of a cluster of dairy producers in nicaragua a representative low income country it looks at cross border diffusion in conditions that differ significantly from advanced economies the current literature that highlights institutional pressures driving global spread of practices has limits for capturing a significant dynamic caused by increased integration of markets and production by focusing on production organization and practices in a late developing context this paper explains the intertwined process of spreading new standards and changing existing local practices by elaborating the relationship among building collective capabilities learning and standards diffusion this study enriches current views on institutional effects and adds to the practice based literature as well as to the work on developing economy firms in organizational research

adaptation bridging and firm upgrading how non market institutions and mncs facilitate knowledge recombination in emerging markets how do multinational corporation mnc subsidiaries and local institutions help or hinder emerging market suppliers to upgrade their capabilities drawing on insights from economic sociology and comparative capitalism we posit that in these contexts of scarce resources and inferior technologies upgrading depends on the ways in which organizational and institutional networks enable firms to integrate imported advanced knowledge with local applied knowledge using a combination of field work and unique survey data of argentine auto parts suppliers we show that process upgrading improves significantly when suppliers have ties to seemingly resource weak non market institutions that improve access to a variety of experiential knowledge these institutions act as knowledge bridges helping local firms tap into diverse applied knowledge embedded in isolated industrial districts and adapt frontier advanced practices to their local conditions moreover suppliers appear to benefit from ties to mnc subsidiaries only when they simultaneously collaborate with certain non market institutions that help them recombine experiential knowledge with the standards gained from the subsidiaries

competition among officials and the abuse of power traditional economic theory suggests that competition among officials providing government goods tends to reduce corruption however empirical evidence does not yet support this view in this paper i show that a corrupt and powerful central authority can use competition among officials to amass resources for itself while competition reduces corruption at the lower level of government corruption at the higher level of government is increased to avoid widespread theft from the central authority competing officials are monitored more intensively than a monopolist hence even though competition among officials generates more consumer surplus it may reduce welfare

tax structure in a federation abstract does national taxation of a base influence the degree to which the local government will use the same tax base does the tax rate chosen by one local government influence the choices made by another local government the theoretical answer to these questions is often in the affirmative because of vertical and horizontal externalities that result when several governments are operating at the same time in a fiscal system however little empirical information is available this paper estimates the impact of horizontal and vertical externalities on the choice of tax rates by local governments operating in a federation higher national income tax rates and lower poverty rates are found to lead to lower local income tax rates

which road leads to stable money demand this paper denies that the demand for money function is any more unstable than other demand functions and maintains that the controversies regarding unstable money demand are produce by poor methodology that is not shared by other areas of the field of economics when investigating demand function properties this abstract was borrowed from another version of this item

public sector organizations and agricultural catch up dilemma in emerging markets the orchestrating role of embrapa in brazil abstract how can an emerging economy beset by political economic and resource challenges jump start the technology catch up process in the agricultural sector and then forge an ecosystem to facilitate the continual generation and dissemination of innovations equally important how can it maintain the viability and salience of its catch up initiatives subsequent to the entry and inevitable dominance of multinational companies we answer these questions by studying catch up in brazil s soy seeds sector over four decades 1973 2015 in an environment of political and economic uncertainty embrapa a public sector organization forged partnerships to first develop absorptive capacity and innovation capabilities and then build an ecosystem of diverse organizations to generate and disseminate catch up outcomes to farmers and other end users embrapa also developed critical tacit knowledge and complementary assets that along with its emphasis on environmental sustainability and protecting national interests helped maintain its salience even after the entry and market dominance by multinational agribusinesses in addition to demonstrating critical roles for public sector organizations and public private networks in technological catch up in an emerging economy s agricultural sector our study calls into question the prevalent notion of technological catch up as a rush to reach the technological frontier at any cost

casinos and political corruption in the united states a granger causality analysis the commercial casino industry experienced an unprecedented expansion in the united states during the 1990s as the industry has grown so has the anecdotal evidence that links the casino industry with political corruption however there have been no empirical analyses of the issue we use state level panel data from 1985 2000 to posit a granger causality analysis of the relationship between corruption convictions of state public officials and the predicted adoptions of casinos at the state level we find evidence that predicted casino adoptions granger cause corruption convictions this finding is suggestive of a scenario of regulatory capture and may help explain why state level gaming regulatory agencies have a history of softening gaming regulations after the initial introduction of casinos our study provides the first empirical evidence linking casinos to political corruption

an econometric analysis of income tax evasion and its detection this article presents an econometric analysis of income tax evasion and its detection based on individual level data drawn from the internal revenue service 1982 and 1985 taxpayer compliance measurement programs i specify a model consisting of two equations the first measures the extent of evasion the second the fraction of evasion detected the empirical analysis explores the effects of income the marginal tax rate and various socioeconomic characteristics on filer evasion behavior and it assesses the variability in detection rates among irs examiners finally i use the empirical estimates to construct new estimates of the income tax gap the new estimates are very close to the previous irs estimates

a spatial analysis of provincial corporate income tax responses evidence from canada using a model of interdependent tax choices and accounting for equalization entitlements and general transfers this paper estimates making use of a spatial econometric framework corporate income tax setting functions for all canadian provincial governments the results show that there is a statistically significant positive fiscal interaction among a subset of provinces and between all provinces and the federal government provincial corporate income taxes are also found to be negatively related to equalization entitlements general federal transfers and the federal corporate income tax a robustness check on the fiscal relationship between ontario and quebec verifies the existence of significant bi directional fiscal interdependencies the paper also introduces u s state corporate income taxes as covariates and examines their interaction with canadian provinces a l aide d un modele de choix fiscaux interdependants et en tenant compte des paiements de perequation et des transferts generaux ce texte calibre a l aide d un cadre econometrique spatial les fonctions de definition de fiscalite des revenus de societes de tous les gouvernements provinciaux canadiens les resultats montrent qu il y a un effet d interaction positif significatif entre un sous ensemble de provinces et entre les provinces dans leur ensemble et le gouvernement federal les impots sur le revenu des societes des provinces sont co relies negativement avec les paiements de perequation les transferts generaux et l impot federal sur le revenu des societes des tests de robustesse montrent qu il y a relation d interdependance fiscale bidirectionnelle significative entre le quebec et l ontario le memoire introduit les impots sur le revenu des societes aux etats unis comme co variables et examine leur interaction avec ce qui se passe dans les provinces canadiennes

estimating policy invariant deep parameters in the financial sector when risk and growth matter this paper provides and illustrates an approach to the estimation of technology parameters in the financial sector the relevant technologies are those of the financial intermediaries that produce inside money as output services and the nonfinancial firms that demand financial services as inputs to production technology we also display analogous results for consumer demand but without the modeling and econometric details which are available elsewhere the problems that we seek to solve through our approach to modeling and euler equation estimation are the lucas critique and what chrystal and macdonald 1994 p 76 recently have called the barnett critique we also explore the tracking ability of the divisia monetary aggregate and simple sum monetary aggregate relative ta the gmm estimated exact rational expectations monetary aggregate for each type of economic agent in this paper we produce and estimate euler equations for firms that demand or supply financial services as an illustration of the available approach first advocated forcefully and convincingly for the financial sector by poterba and rotemberg 1987 with respect to consumer demand for financial services we do not seek to integrate the three sectors into a complete economy in which aggregation blockings would have to conform across sectors in addition we do not explore in detail the

does electoral accountability affect economic policy choices evidence from gubernatorial term limits this paper analyzes the behavior of u s governors from 1950 to 1986 to investigate a reputation building model of political behavior we argue that differences in the behavior of governors who face a binding term limit and those who are able to run again provides a source of variation in discount rates that can be used to test a political agency model we find evidence that taxes spending and other policy instruments respond to a binding term limit if a democrat is in office the result is a fiscal cycle in term limit states which lowers state income when the term limit binds

natural resources decentralization and risk sharing can resource booms unify nations previous studies imply that a positive regional fiscal shock such as a resource boom strengthens the desire for separation in this paper we present a new and opposite perspective we construct a model of endogenous fiscal decentralization that builds on two key notions a trade off between risk sharing and heterogeneity and a positive association between resource booms and risk the model shows that a resource windfall causes the nation to centralize as a mechanism to either share risk and or prevent local capture depending on the relative bargaining power of the central and regional governments we provide cross country empirical evidence for the main hypotheses finding that resource booms i decrease the level of fiscal decentralization with no u shaped patterns ii cause the former due to risk sharing incentives primarily when regional governments are relatively strong and iii have no effect on political decentralization

decoupling standards from practice the impact of in house certifications on coffee farms environmental and social conduct in this paper we investigate whether coffee farms that have been granted in house socio environmental certification from a global buyer display better social and environmental conduct compared to non certified farms we perform an econometric analysis using data from an original cross country survey covering 575 farms in various regions of brazil colombia costa rica guatemala and mexico we find that farms that have been granted in house certification demonstrate better environmental but not better social conduct than non certified farms we find also that the positive relationship between in house certification and environmental conduct is stronger if the farm sells to a cooperative and if it is located in an institutionally weak country finally we find that the institutional strength of the farm s home country has a positive influence on its social conduct we discuss how our analysis contributes to the literature on the social and environmental impacts of certifications and to scholarship in global value chains social and environmental upgrading

isolated capital cities accountability and corruption evidence from us states we show that isolated capital cities are robustly associated with greater levels of corruption across us states in line with the view that this isolation reduces accountability we then provide direct evidence that the spatial distribution of population relative to the capital affects different accountability mechanisms newspapers cover state politics more when readers are closer to the capital voters who live far from the capital are less knowledgeable and interested in state politics and they turn out less in state elections we also find that isolated capitals are associated with more money in state level campaigns and worse public good provision jel d72 d73 h41 h83 k42 r23

the consequences of overlapping tax bases for redistribution and public spending in a federation tax and expenditure policies are studied in a federation with imperfectly mobile households states implement a linear progressive tax and supply a public good a vertical fiscal externality reflecting the effect of state policies on federal revenues provides an incentive for state taxes to be too progressive a horizontal fiscal externality causes nonoptimal state taxes and expenditures because of the migration effect the federal government implements its own linear progressive tax and makes transfers to the states the federal government can nullify both externalities by appropriate fiscal policies and redistributive taxation can be decentralized to the states c 1998 elsevier science s a

does federalism lead to excessively high taxes the relative strengths of vertical and horizontal tax externalities turn on the balance between the interest responsiveness of the supply of savings and demand for capital the extent to which immobile factors are taxed by the states and the strength of preferences between federal and state expenditures the vertical externality will dominate if the aggregate tax base of the federation is responsible to the state tax instrument tax interactions in federations are more complex than has often been supposed

estimating the marginal cost of quality improvements the case of the uk electricity distribution companies the main aim of this paper is to develop an econometric approach to estimation of marginal costs of improving quality of service we implement this methodology by way of applying it to the case of the uk electricity distribution networks the estimated marginal costs allow us to shed light on the effectiveness of the current uk incentive regulation to improve quality and to derive optimal quality levels and welfare losses due to sub optimal quality levels the proposed method also allows us to measure the welfare effect of the observed quality improvements in the uk between 1995 and 2003 our results suggest that while the incentive schemes established by the regulator to encourage utilities to reduce network energy losses leads to improvement in sector performance they do not provide utilities with sufficient incentives to avoid power interruptions we find that the observed improvements in quality during the period of this study only represented 30 of the potential customer welfare gains and hence there was still significant scope for quality improvements

whistleblower laws and exposed corruption in the united states this research creates a unique internet based measure of awareness about state level whistleblower laws and provisions to examine their effects on observed corruption in the united states are whistleblower laws complementary or substitutes for other more direct corruption control measures placing the analysis within the corruption literature the findings show that greater whistleblower awareness results in more observed corruption and this finding holds across specifications internet awareness about whistleblower laws seems relatively more effective at exposing corruption than the quantity and quality of state whistleblower laws themselves

notes on bribery and the control of corruption abstract existing models of corruption that allow for bribery have ignored an important recursive problem when an auditor or a policeman bargains over a bribe with a person he has arrested he has to take into account the fact that he may in turn be caught for taking this bribe and be involved in a similar bargain but from the other side the purpose of this paper is to provide a simple model for capturing this recursion having done so it goes on to analyse some conditions for the control of corruption these turn out to be different from what conventional wisdom suggests

on the economic incentives for taking bribes this paper presents an empirical analysis of the factors affecting bribe taking by public officials factors influencing the acceptance of bribes include the probability of being convicted severity of punishment government salary relative to private sector income the demonstration effect and the unemployment rate our results indicate that higher probability of being convicted discourages the acceptance of bribes as does more severe punishment low relative earnings high unemployment and the demonstration effect of aggregate advertising all lead to increased bribe taking

horizontal and vertical indirect tax competition theory and some evidence from the usa this paper provides a simple theoretical framework for analysing simultaneous vertical and horizontal competition in excise taxes and estimates equations informed by the theory on a panel of us state and federal excise taxes on cigarettes and gasoline we also examine the role played by smuggling the results are generally consistent with the theory when the characteristics of the markets for the goods are taken into account for neither good do federal excise taxes affect state taxes taxes in neighbouring states have a significant and large effect in the case of cigarettes and a much weaker effect in the case of gasoline we also find that in the setting of cigarette taxes concerns about cross border shopping play a more important role than concerns about smuggling

comments on competitive responsiveness marketing science features many and diverse articles that analyze competitive responsiveness although recent marketing science editorials e g shugan 2002 suggest that competitive responsiveness is only a part of a comprehensive competitive marketing strategy it remains a vital part for that reason and many others marketing science is particularly proud of this special issue edited by david j reibstein and dick r wittink before introducing and vigorously applauding both the editors and authors of this excellent special issue we emphasize that competitive responsiveness raises numerous issues including whether one can forecast outcomes of new policies based on past observations made under old policies i e the lucas critique and decisions regarding which variables should be considered endogenous shugan 2004 i e determined within the model perhaps normative models are inherently perishable evolution in market structure requires modifications over time also although complete consistency within the world of the model is aesthetically pleasing imposing industry specific exogenous constraints that might appear unrelated to the modeling assumptions is sometimes necessary

local fiscal competition an application to sales taxation with multiple federations abstract local sales tax rates influence the location of retail activity this paper develops a theory and empirical identification strategy for studying sales tax competition with multiple federations as exemplified by multiple counties each containing several cities in addition to strategic interactions with nearby cities and a city s own county city tax rates are influenced by the tax rates of neighboring counties cities react heterogeneously to own county sales tax rates depending on distance to the county border using data on the driving time to county borders and a comprehensive cross section of local sales tax rates i exploit variation in proximity to county borders to identify vertical fiscal competition cities located near county borders react more intensely to their county s tax rate in comparison to towns at the interior an increase in the neighboring county tax rate raises city tax rates in nearby counties

the relationship between corruption and income inequality in u s states evidence from a panel cointegration and error correction model we investigate the causality between corruption and income inequality within a multivariate framework using a panel data set of all 50 u s states over the period 1980 to 2004 the heterogeneous panel cointegration test by pedroni oxf bull econ stat 61 653 670 1999 econom theory 20 597 627 2004 indicates that in the long run corruption and the unemployment rate have a positive and statistically significant impact on income inequality while a negative impact is found for real personal income per capita education and unionization rate the granger causality results associated with a panel vector error correction model indicate both short run and long run bidirectional causality between corruption and income inequality

governance and trade in fresh vegetables the impact of uk supermarkets on the african horticulture industry production of fresh vegetables for export has grown rapidly in a number of countries in sub saharan africa over the last decade this trade brings producers and exporters based in africa together with importers and retailers in europe large retailers in europe play a decisive role in structuring the production and processing of fresh vegetables exported from africa the requirements they specify for cost quality delivery product variety innovation food safety and quality systems help top determine what types of producers and processors are able to gain access to the fresh vegetables chain and the activities they must carry out the control over the fresh vegetables trade exercised by uk supermarkets has clear consequences for inclusion and exclusion of producers and exporters of differing types and for the long term prospects for the fresh vegetables industry in the two major exporting countries studied kenya and zimbabwe

packing a punch political action committees and corruption political action committees pacs are unique and prominent players in american politics yet formal research on some aspects of pacs is lacking using us data over the period 1970 to 2009 this research demonstrates that the growth in pacs is positively associated with greater corruption a 10 increase in the number of pacs per capita would increase corruption by about 8 upon disaggregation corporate pacs rather than labour pacs are positively associated with corruption the effects of economic prosperity government size and population on us corruption are generally in line with the literature

does greater accountability improve the quality of public service delivery evidence from uganda summary it is now widely realized that in many developing countries the low quality of public services and governance can limit the scope for poverty reduction and growth empirical micro level evidence on the scope for improved accountability to help reduce corruption and improve the quality with which critical public services are provided is however limited using a large data set from uganda to address this issue we find that household knowledge on how to report inappropriate behavior by bureaucrats and unsatisfactory quality of services does help to not only reduce the incidence of corruption but is also associated with significant improvements in service quality

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

vertical fiscal externalities in a federation abstract we examine vertical fiscal externalities in a model where a state government provides a productivity enhancing public input and both the state and the central government tax wages and profits previous literature has emphasized the negative tax externality that occurs when two levels of government impose distortionary taxes on the same tax base we show that an increase in the state government s tax rate on wage income can increase federal revenues if the federal government imposes an ad valorem tax on employees wages and the demand for labour is inelastic we also show that an increase in the provision of the public input can either increase or reduce federal tax revenues leading to either under or over provision of the public input by the state government

globalization and the environment determinants of firm self regulation in china critics assert that globalization is detrimental to the environment because it encourages location of polluting industries in countries with low environmental regulations we suggest that globalization might also have positive environmental effects because global ties increase self regulation pressures on firms in low regulation countries using survey data from firms in china we find that multinational ownership multinational customers and exports to developed countries increase self regulation of environmental performance

vertical tax competition in brazil empirical evidence for icms and ipi in the period 1995 2009 abstract the main objective of this study is to quantify the impact caused by changes in federal tax on the tax policy of the brazilian states considering the presence of horizontal tax competition between states using panel data covering 26 brazilian states plus the federal district during the period 1995 2009 two models were estimated representing the average reaction of the states in response to changes in federal tax rates in the first model both levels of government act simultaneously whereas in the second model reaction is sequential with the federal government acting as the leader in defining its effective tax rates the results indicate a positive and significant response of states to increases in the federal tax rate resulting in an over taxation of the common tax base and higher tax rates additional tests show that the first model is the most suitable to represent the problem analysed

coordination failures and government policy a model with applications to east asia and eastern europe abstract poor countries must specialize in standardized labor intensive commodities middle income countries may have a richer menu of options if their labor force is reasonably well educated and skilled the multiplicity of equilibria is due to a coordination problem inherent in activities that require specialized inputs if no intermediate inputs are presently produced there may be little incentive for any single firm to do so on its own the economy may get stuck in a low wage low tech equilibrium an investment subsidy or a minimum wage policy can enhance welfare by moving the economy to a superior equilibrium

decentralization and corruption evidence across countries the relationship between decentralization of government activities and the extent of rent extraction by private parties is an important element in the recent debate on institutional design the theoretical literature makes ambiguous predictions about this relationship and it has remained virtually unexamined by empiricists the authors make a first attempt at examining the issue empirically by looking at the cross country relationship between fiscal decentralization and corruption as measured by a number of different indices their estimates suggest that fiscal decentralization in government spending is significantly associated with lower corruption moreover they find that the origin of a country s legal system for example civil versus common legal code performs extremely well as an instrument for decentralization the estimated relationship between decentralization when so instrumented and corruption is even stronger the evidence suggests a number of interesting areas for future work including investigating whether there are specific services for which decentralized provision has a particularly strong impact on political rent extraction and understanding the channels through which decentralization succeeds in keeping corruption in check

a dynamic model of corruption deterrence abstract this paper presents a model of corruption deterrence with a simple overlapping generations structure built into it a crucial assumption is that when corruption becomes more prevalent in the economy it is harder to audit a corrupt official effectively it is shown that this assumption may give rise to several stationary equilibrium levels of corruption this possibility has been exploited to explain why sometimes a government may temporarily resort to an extremely severe deterrence policy and why the same deterrence scheme may imply quite different levels of corruption a case study is provided to give empirical support to the model

third world copycats to emerging multinationals institutional changes and organizational transformation in the indian pharmaceutical industry this article investigates how indian pharmaceutical firms facing discontinuous institutional changes in their domestic environment due to economic liberalization and intellectual property reforms have undertaken organizational transformation internationalization of resources and product markets constitutes an important component of organizational transformation for local firms in emerging economies using longitudinal data on 206 indian pharmaceutical firms from 1995 2004 we find that firms access to international technological and financial resources enables product market internationalization furthermore we theorize and find support for our predictions that the association between international resources and markets is conditioned by time and business group affiliation and product market internationalization affects financial performance several implications thus emerge for theory and practice associated with the sources of competitiveness in emerging economy firms and their transformation into globally competitive multinational firms

globalization pressures and the state the worldwide spread of central bank independence the authors examine the impact of globalization on state structures in the specific instance of the central bank following the world system world society and neoinstitutional perspectives in sociology they assume that states are in cultural political and economic competition with each other thereby seeking to maintain their position and status frequently by adopting organizational forms or practices that make them isomorphic with their environment the authors predict that countries boost the independence of their central bank from the political power as their exposure to foreign trade investment and multilateral lending increases they also model the cross national dynamic process of diffusion of central bank independence by examining the impact of cohesive and role equivalent trade relationships between countries they find support for their hypotheses with information on 71 countries between 1990 and 2000

federalism partial prohibition and cross border sales evidence from recreational marijuana abstract marijuana is partially prohibited though banned federally it is available to 1 in 4 u s adults under state statutes we measure the size of the interstate trade generated by state level differences in legal status with a natural experiment oregon allowed stores to sell marijuana for recreational use on october 1 2015 next to washington where stores had been selling recreational marijuana since july 2014 using administrative data covering the universe of washington s sales and a differences in discontinuities approach we find retailers along the oregon border experienced a 36 decline in sales immediately after oregon s market opened we investigate the home location of recent online reviewers of marijuana retailers and find similar cross border patterns by the end of washington s 2018 fiscal year our results imply that washington had earned between 44 million and 75 million in tax revenue from cross border shoppers these cross border incentives may create a race to legalize

the economic effect of corruption in italy a regional panel analysis abstractthe economic effect of corruption in italy a regional panel analysis regional studies this paper provides a within country analysis of the impact of corruption on economic growth using a panel of italian regions from 1968 to 2011 through a robust measure of corruption this measure is averaged over five year periods to reduce short run fluctuations and probable delayed effects the results show a significant negative impact of corruption on long term growth in all specifications both on average and for each italian region as a consequence a zero level of corruption is growth maximizing this effect is non linear such that the negative impact of corruption on growth becomes less intense as corruption increases

vertical externalities in tax setting evidence from gasoline and cigarettes abstract a common feature of federal systems is that tax bases are joint property consequently state and federal tax setting decisions are interdependent our aim here is to put forward a rudimentary theoretical analysis of this phenomenon and to use the theory as a framework for econometrically estimating the magnitude of the responses we find that when the federal government increases taxes there is a significant positive response of state taxes for example a 10 cent per gallon increase in the federal tax rate on gasoline leads to a 3 2 cent increase in the state tax rate

the effects of tax competition when politicians create rents to buy political support abstract we set up a probabilistic voting model to explore the hypothesis that tax competition improves public sector efficiency and social welfare in the absence of tax base mobility distortions in the political process induce vote maximising politicians to create rents to public sector employees allowing tax base mobility may be welfare enhancing up to a point because the ensuing tax competition will reduce rents however if tax competition is carried too far it will reduce welfare by causing an underprovision of public goods starting from an equilibrium where tax competition has eliminated all rents a coordinated rise in capital taxation will always be welfare improving for plausible parameter values it will even be welfare enhancing to carry tax coordination beyond the point where rents to public sector workers start to emerge

more politicians more corruption evidence from swedish municipalities in the literature on political economy and public choice it is typically assumed that government size correlates positively with public corruption the empirical literature however is inconclusive owing to both measurement problems and endogeneity this paper creates a corruption index based on original data from a survey covering top politicians and civil servants in all swedish municipalities the effect of more politicians on corruption problems is analyzed using discontinuities in the required minimum size of local councils despite the fact that sweden consistently has been ranked among the least corrupt countries in the world the survey suggest that non trivial corruption problems are present in sweden municipalities with more local council seats have more reported corruption problems and the regression discontinuity design suggests that the effect is causal

knowledge transfer from international joint ventures to local suppliers in a developing economy using in depth data from 155 pakistani auto components suppliers we study the role of socialization in knowledge transfer from international joint venture assemblers we find that whereas formal socialization mechanisms enhance the comprehension and speed of knowledge transfer to local suppliers informal socialization mechanisms enhance comprehension but not speed building on structural contingency theory we find that having a mechanistic organizational structure among knowledge recipients is an antecedent to formal socialization leading to improved knowledge transfer

vertical tax competition and consumption externalities in a federation with lobbying abstract we consider a federation with two layers of government in which leviathan policy makers levy an excise tax on a consumption good that generates a negative externality and that is produced in an imperfectly competitive market when both layers of government are allowed to tax policy choices are affected also by vertical tax competition in this setting tax policy in general is not efficient we then examine how special interest groups may influence tax policy by lobbying the policy makers we find that depending on market structure and on the level of the externality lobbying can improve efficiency and that tax base sharing by two layers of government can be more efficient than taxation by a single layer