the real exchange rate conundrum the case of central america abstract this paper evaluates alternative measures of the real exchange rate for mexico and central american countries bilateral and multilateral real exchange rates using the consumer price index wholesale price index and gross domestic product deflator are calculated there are often significant differences between the bilateral and multilateral measures of the real exchange rate real exchange rates based on consumer price indexes and gross domestic product deflators were found to be more closely related to each other than either one was to the wholesale price index

women as policy makers evidence from a randomized policy experiment in india this paper uses political reservations for women in india to study the impact of women s leadership on policy decisions since the mid 1990 s one third of village council head positions in india have been randomly reserved for a woman in these councils only women could be elected to the position of head village councils are responsible for the provision of many local public goods in rural areas using a dataset we collected on 265 village councils in west bengal and rajasthan we compare the type of public goods provided in reserved and unreserved village councils we show that the reservation of a council seat affects the types of public goods provided specifically leaders invest more in infrastructure that is directly relevant to the needs of their own genders

pro poor targeting and accountability of local governments in west bengal a commonly alleged pitfall of decentralization is that poverty socio economic inequality and lack of political competition allow local elites to capture local governments this hypothesis is empirically examined using a longitudinal sample of 89 west bengal villages concerning targeting of credit agricultural input kits employment programs and fiscal grants spanning the period 1978 98 higher poverty land inequality and low caste composition of the poor was associated with negligible adverse effects on targeting of private goods to the poor within villages but with lower employment generation out of allotted funds and significantly lower allocation of resources to the village as a whole political competition or literacy levels among the poor were not systematically related to targeting

foreign direct investment and the dark side of decentralization countries differ in their government architecture some countries are characterized by a high degree of concentration of fiscal administrative judicial executive and lawmaking powers whereas others have decentralized many functions and responsibilities of government to different jurisdictions and various levels of government the cross country differences in the organization of government are also not static but have been subject to substantial change in many countries the co existence of different organizational patterns of government has created an important debate regarding the determinants of particular government structures as well as questions regarding the optimality of different forms of organization

centralized versus decentralized provision of local public goods a political economy approach abstract this paper takes a fresh look at the trade off between centralized and decentralized provision of local public goods it argues that the sharing of the costs of local public spending in a centralized system will create a conflict of interest between citizens in different jurisdictions when spending decisions are made by a legislature of locally elected representatives this conflict of interest will play out in the legislature depending on precisely how the legislature behaves the result may be excessive public spending or allocations of public goods characterized by uncertainty and misallocation across districts the extent of the conflict of interest between districts is affected by spillovers and differences in tastes for public spending thus the relative performance of centralized and decentralized systems depends upon spillovers and differences in tastes for public spending but for different reasons than suggested in the existing literature

fiscal federalism and lobbying abstract which government functions should be decentralized resp centralized once lobbying behavior is taken into account we find that the answer largely depends on how the interests of the regional lobbies are positioned with respect to the function to be decentralized resp centralized when regional lobbies have conflicting interests then lobbying is less damaging for social welfare under centralization than under decentralization on the contrary when regional lobbies have aligned interests then lobbying is less damaging for social welfare under decentralization provided that policy spillovers on the non organized groups are not too strong

capture and governance at local and national levels 135 despite the importance of this issue not much systematic research appears to have been devoted to assessing the relative susceptibility of national and local governments to interestgroup capture here we describe a model of two party electoral competition with probabilistic voting behavior and lobbying by specialinterest groups based on david baron 1994 and gene grossman and elhanan helpman 1996 that helps identify determinants of relative capture at different levels of government these include relative levels of voter awareness and interest group cohesiveness electoral uncertainty electoral competition heterogeneity of districts with respect to inequality and the electoral system while some of these uphold the traditional madisonian presumption others are likely to create a tendency for lower capture at the local level so the net effect is theoretically ambiguous this suggests that the extent of relative capture may be context specific and needs to be assessed empirically

decentralization political competition and corruption abstract we study the effect of decentralization on corruption in a political agency model from the perspective of a region in a model where corruption opportunities are lower under centralization at each period of time decentralization makes it easier for citizens to detect corrupt incumbents as a consequence the relationship between fiscal decentralization and corruption is conditional on political competition decentralization is associated with lower higher levels of corruption for sufficiently high low levels of political competition we test this prediction and find that it is empirically supported also we show how the preferences of voters and politicians about fiscal decentralization can diverge in situations where political competition is weak

procurement auctions with entry of bidders abstract in procurement auctions with a fixed number of bidders there is a tradeoff between cost efficiency and rent extraction an optimal mechanism therefore entails distortions of effort laffont and tirole 1987 if potential suppliers must sink an entry investment before they can participate in the auction then decreasing the firms rent may imply reduced entry we show that if potential bidders are uninformed before entry commitment to a plain nondistortive auction is optimal in contrast if potential bidders learn all their private information before entry the optimal mechanism entails the same distortions as in laffont and tirole s static model

decentralization and efficiency of subsidy targeting evidence from chiefs in rural malawi abstract lower income countries spend vast sums on subsidies beneficiaries are typically selected via either a proxy means test pmt or through a decentralized identification process led by local leaders a decentralized allocation may offer informational advantages but may be prone to elite capture we study this trade off in the context of two large scale subsidy programs in malawi for agricultural inputs and food decentralized to traditional leaders chiefs who are asked to target the needy using household panel data we find that nepotism exists but has only limited mistargeting consequences importantly we find that chiefs target households with higher returns to farm inputs generating an allocation that is more productively efficient than what could be achieved through strict poverty targeting this could be welfare improving since within village redistribution is common productive efficiency targeting is concentrated in villages with above median levels of redistribution

clientelism contagious voting and governance this paper explains inferior quality of governance in less affluent countries in terms of a patron client relationship between political parties and a large section of voters the client voters resort to strategic voting which is shown to be contagious leading to suboptimal effort choice by the incumbent government and a higher probability for the incumbent to remain in power the possibility of competition between the incumbent and the opposition in terms of expenditure on political propaganda actually helps the incumbent and reinforces these results

decentralizing antipoverty program delivery in developing countries we study the effects on accountability in government service delivery of decentralizing administration of an antipoverty program while governments at both central and local levels are vulnerable to antipoor policy biases owing to political capture centralized delivery systems are additionally prone to bureaucratic corruption owing to problems in monitoring bureaucratic performance decentralizing the delivery system promotes cost effectiveness and improves intraregional targeting at low program scales but interregional targeting may deteriorate as central grants to high poverty regions shrink owing to high capture of local governments by local elites in such regions

political decentralization and corruption evidence from around the world abstract how does political decentralization affect the frequency and costliness of bribe extraction by corrupt officials previous empirical studies using subjective indexes of perceived corruption and mostly fiscal indicators of decentralization have suggested conflicting conclusions in search of more precise findings we combine and explore two new data sources an original cross national data set on particular types of decentralization and the results of a firm level survey conducted in 80 countries about firms concrete experiences with bribery in countries with a larger number of government or administrative tiers and given local revenues a larger number of local public employees reported bribery was more frequent when local or central governments received a larger share of gdp in revenue bribery was less frequent overall the results suggest the danger of uncoordinated rent seeking as government structures become more complex

the political economy of public goods some evidence from india we are interested in how public goods get allocated by a centralized state we use data on public goods and social structure from parliamentary constituencies in rural india to understand the allocation of these goods over the 1970s and 1980s national policies and political agendas during this period emphasized universal access to basic amenities and financed a rapid expansion in rural infrastructure we find evidence of considerable equalization in many of these facilities reflecting perhaps the importance of these commitments among the historically disadvantaged social groups those that mobilized themselves politically gained relative to the others measures of social heterogeneity that have been emphasized in the recent empirical literature on public goods are relevant but not overwhelming in their importance

decentralization of governance and development all around the world in matters of governance decentralization is the rage even apart from the widely debated issues of subsidiarity and devolution in the european union and states rights in the united states decentralization has been at the center stage of policy experiments in the last two decades in a large number of developing and transition economies in latin america africa and asia the world bank for example has embraced it as one of the major governance reforms on its agenda for example world bank 2000 burki perry and dillinger 1999 take also the examples of the two largest countries of the world china and india decentralization has been regarded as the major institutional framework for the phenomenal industrial growth in the last two decades in china taking place largely in the nonstate nonprivate sector india ushered in a landmark constitutional reform in favor of decentralization around the same time it launched a major program of economic reform in the early 1990s on account of its many failures the centralized state everywhere has lost a great deal of legitimacy and decentralization is widely believed to promise a range of benee ts it is often suggested as a way of reducing the role of the state in general by fragmenting central authority and introducing more intergovernmental competition and checks and balances it is viewed as a way to make government more responsive and efe cient technological changes have also made it somewhat easier than before to provide public services like electricity and water supply relatively efe ciently in smaller market areas and the lower levels of government have now a greater ability to handle certain tasks in a world of rampant ethnic cone icts and separatist movements decentralization is also regarded as a way of diffusing social and political tensions and ensuring local cultural and political autonomy these potential benee ts of decentralization have attracted a very diverse range

can mandated political representation increase policy influence for disadvantaged minorities theory and evidence from india accountable governments often fail to reflect the interests of disadvantaged minorities this paper exploits the institutional features of political reservation as practiced in indian states to examine the role of mandated political representation in providing disadvantaged groups influence over policy making ifind that political reservation has increased transfers to groups which benefit from the mandate this finding also suggests that complete policy commitment may be absent in democracies as is found in this case jel d72 d78 hl 1 h50

fiscal decentralization in rentier regions evidence from russia summary the paper argues that governments in regions that rely heavily on intergovernmental transfers and natural resource rents face serious distortions in their incentive structure as a result such regions tend to have more fiscally centralized governments than the regional characteristics would suggest data on russian regions in the late 1990s early 2000s support this hypothesis advancing intraregional fiscal decentralization in rentier regions could reduce policy distortions and make the subnational environment more supportive of economic development

village elections public goods investments and pork barrel politics chinese style a key issue in political economy concerns the accountability that governance structures impose on public officials and how elections and representative democracy influence the allocation of public resources in this paper we utilise a unique set of survey data set from nearly 2450 randomly selected villages describing china s recent progress in village governance reforms and its relationship to the provision of public goods in rural china between 1998 and 2004 two sets of questions are investigated using an empirical framework based on a theoretical model in which local governments must decide to allocate fiscal resources between public goods investments and other expenditures the empirical analysis both in the descriptive and econometric analyses suggests that when the village leader is elected directly ceteris paribus the provision of public goods rises compared to when the leader is not elected directly by villagers thus in this way it is possible to conclude that democratisation at least at the village level in rural china appears to increase the quantity of public goods investment second we seek to understand the mechanism that is driving the results also based on the survey data we find that when village leaders who had been directly elected were able to implement more public projects during their terms of office they as the incumbent were more likely to be re elected in this way we argue that the link between elections and investment may be a rural china version of pork barrel politics

efficiency improving investment and the ratchet effect abstract in a long term relationship between a regulator and a firm the production technology may change due to investment this paper investigates how the introduction of such an investment possibility influences the dynamic regulation problem when long term commitments are infeasible contractible investment is shown to reduce the ratchet effect by increasing separation in the first period due to the separation effect of investment the first period optimal scheme converges toward the optimal scheme with commitment as investment increases finally assuming noncontractible investment the paper analyzes the relationship between separation and the degree of under investment

the value of ignorance this article provides a new perspective on the information structure of an agent in a standard model of adverse selection before the contracting takes place the agent has the opportunity to gather private information on a relevant parameter that affects final payoffs i allow for the possibility that the agent remains uninformed with some probability the agent s optimal choice of information structure is derived and it is shown that in the case of two states of nature the possibility of remaining ignorant has a positive strategic value for the agent since a poor information structure generates strategic benefits there will be no equilibrium in which the agent is perfectly informed even if additional information is costless at the margin

testing the bargaining hypothesis in the manufacturing sector in developing countries the bargaining power model of hc mnc host country multinational corporation interaction conceives of economic nationalism in terms of rational self interest and assumes both inherent conflict and convergent objectives in extractive industries there is strong evidence that outcomes are a function of relative bargaining power and that as power shifts to developing hcs over time the bargain obsolesces a cross national study of the bargaining model using data from 563 subsidiaries of u s manufacturing firms in forty nine developing countries indicates that while the bargaining framework is an accurate model of mnc host country relationships manufacturing is not characterized by the inherent structurally based and secular obsolescence that is found in the natural resource industries shifts in bargaining power to hcs may take place when technology is mature and global integration limited in industries characterized by changing technologies and the spread of global integration the bargain will obsolesce very slowly and the relative power of mncs may even increase over time

the political economy of government responsiveness theory and evidence from india the determinants of government responsiveness to its citizens is a key issue in political economy here we develop a model based on the solution of political agency problems having a more informed an politically active electorate strengthens incentives for governments to be responsive this suggests that there is a role both for democratic institutions and the mass media in ensuring that the preferences of citizens are reflected in policy the ideas behind the model are tested on panel data from india we show that public food distribution and calamity relief expenditure are greater controlling for shocks where governments face greater electoral accountability and where newspaper circulation is highest

land reallocation in an agrarian transition liberalising key factor markets is a crucial step in the transition from a socialist control economy to a market economy however the process can be stalled by imperfect information high transaction costs and covert resistance from entrenched interests the article studies agricultural land reallocation in the wake of vietnam s efforts to establish a free market in land use rights following de collectivisation inefficiencies in the initial administrative allocation are measured against an explicit counterfactual land allocation responded positively but slowly to the initial inefficiencies there is no sign that the transition favoured the land rich or that it was thwarted by local officials vietnam s agrarian transition has closely followed a now classic policy scenario for economies in transition first one privatises the main productive assets in this case agricultural land use rights then one legalises their free exchange in the first step the de collectivisation of vietnam s agriculture meant that the land that had previously been farmed collectively was to be allocated by administrative means across households within each commune without a market mechanism to guide the process it can be expected that inefficiencies in land allocation would remain with some households having too much land relative to a competitive market allocation and some too little ravallion and van de walle 2004 document evidence of such inefficiencies in the initial administrative allocation at the time of de collectivisation

trade policy reform and industrial sector growth in mexico 1960 1991 the purpose of this paper is to analyze how the mexican manufacturing sector was affected by changing trade regimes between 1960 and 1991 this short version of the paper focuses mainly on the trade liberalization of the last decade it also omits most tables and the discussion of the literature after a summary description of the policy regime changes it examines the resulting changes in the incentive structure focusing on the relationship between devaluation and protection then the paper analyzes manufacturing sector growth and structural changes in terms of demand sources the analysis is based on the following data rates of protection from ten kate and de mateo 1989a and 1989b the real exchange rate from fleissig and grennes 1994 and production and trade data from the national accounts inegi 1993 national financiera 1991 this study s conclusions are relevant for the timing and sequencing of future trade policy reforms

trigger price regulation we consider the difficulty of achieving efficient prices and investments when returns on a public utility s projects are vulnerable to opportunistic ratemaking we model the long term relationship between a firm and its regulator as a time dependent supergame in which the regulator sets price ceilings to maximize surplus and the firm invests to maximize profit we find history dependent strategies that support self enforcing mutually beneficial equilibria equilibrium payoffs are close to the planning solution provided interest rates are small enough and capital depreciates fast enough we concentrate on trigger price regulation where in response to inefficient behavior the regulator cuts price down to operating cost and the firm curtails investment this mechanism performs well even with production economies and with restrictions on players threats

gathering information before the contract is offered the case with two states of nature abstract focusing on a baron myerson model with two states of nature in the first part of the paper we study the contract that a principal would offer to an agent when he does not know whether the agent is informed or not about the state of nature in the second we endogenize the information of acquisition and show that in equilibrium a baron myerson type contract will never be offered

increasing wage dispersion and the changes in relative employment and wages in mexico s urban informal sector 1987 1993 this study analyses the role of changes in informal formal relative employment wage levels and wage inequality in explaining increasing wage dispersion in mexico during the 1987 1993 period from 1987 to 1993 the variance of the log of hourly wages for mexican workers increased by more than 50 per cent using data from the encuesta nacional de empleo urbano we find that this increase in the overall wage dispersion was mainly driven by increasing wage dispersion in the formal sector coupled with a faster growth in formal sector employment as a percentage of total employment however compression in the distribution of wages within the informal sector contributed to substantially slowdown the increasing overall wage inequality about 60 per cent of the 1987 1993 4 65 percentage point reduction in the informal sector share of total employment is explained by changes in the structure that determines sectoral employment the rest is explained by changes in the composition of the labour force particularly in

the countervailing effects of competition on public goods provision when bargaining inefficiencies lead to bad outcomes political competition is widely recognized as a mediator of public goods provision through its salutary effect on incumbents electoral incentives we argue that political competition additionally mediates public goods provision by reducing the efficiency of legislative bargaining these countervailing forces may produce a net negative effect in places with weak parties and low transparency typical of many young democracies we provide evidence of a robust negative relationship between political competition and local public goods using panel data from mali tests of mechanisms corroborate our interpretation of this relationship as evidence of legislative bargaining inefficiencies to explore the generalizability of these findings we analyze cross country panel data and show that political competition leads to better worse public goods provision under high low levels of party system institutionalization the paper sheds light on why political competition is only selectively beneficial and underscores the importance of considering both the electoral and legislative arenas

sequential equilibrium investment by regulated firms we examine the investment decisions of regulated firms in a sequential equilibrium model under asymmetric information the regulator is unable to commit to a pricing policy unlike mechanism design models but sets rates after observing the firm s investment the information conveyed by the firm s investment level alleviates the underinvestment observed under full information with limited regulatory commitment the equilibrium regulatory strategy can be characterized by a nonlinear rate of return schedule a regulator announcing such a schedule would be able to make a credible commitment

missing public funds and targeting performance evidence from an anti poverty transfer program in indonesia abstract this paper investigates how failing to consider missing funds in public resource delivery can lead to misleading conclusions on the nature and correlates of targeting performance combining administrative data on disbursement and household survey data on receipt under indonesia s anti poverty program inpres desa tertinggal idt we find that only 69 of disbursements were actually received by the intended beneficiaries when these missing funds are ignored the distribution of idt benefits is pro poor and better targeting is found in districts with higher per capita expenditure however when the missing funds are taken into account the distribution of idt benefits in fact becomes less pro poor than universal equal distribution and better targeting is correlated with a higher proportion of female village heads and a higher level of villagers human capital these results underscore the importance of considering the size and allocation of missing funds in the analysis of targeting in public resource delivery

decentralized targeting of an antipoverty program abstract developing country governments often delegate authority over the targeting of antipoverty programs to community organizations while retaining control over how much goes to each community we offer a theoretical characterization of the information structure in such programs and the interconnected behavior of the various players our model motivates an econometric specification for explaining distributional outcomes results for bangladesh s food for education ffe program indicate that within village targeting improved with program size lower land inequality less remoteness fewer shocks and less private redistribution there is no sign that the center took account of village attributes conducive to reaching the poor

decentralization as a constraint to leviathan a panel cointegration analysis this paper extends the empirical literature about the effects of fiscal decentralization on the growth of government along three dimensions it distinguishes between the effects of the level of decentralization from the way local governments finance their expenditures common pool versus own resources it uses a panel cointegration approach to separate the long run effects of decentralization from the short run dynamics and it extends and revises the datasets generally used in these empirical analyses the results show that the amount of revenue raised by sub national governments leads to a long term fall in the size of government but grants have the opposite effect in addition a greater decentralization of expenditure leads to greater overall spending when the short term is considered these influences work slowly as the speed of adjustment towards the desired government size is relatively sluggish in addition in the short run there is also a clear effect from the role of local revenue raising powers that stimulates the growth of government these results appear robust to changes in the composition of the variables countries and periods included the sample

lobbying and de centralization this paper presents a positive theory of de centralization of policy decisions in an international union defined as a supranational jurisdiction that may exercise a policy prerogative on behalf of member countries i build a benchmark model where national lobbies can coordinate i e form a trans national lobby at no cost and show that lobbying does not affect the fiscal regime on the other hand when interest groups cannot coordinate decentralization emerges as a political equilibrium with lobbying policy centralization hurts national lobbies by increasing competition for influence at a constitutional stage interest groups induce politically motivated governments to reject centralization three extensions show that this result depends on the level of cross border externalities the voting rule at the constitutional stage and the details of the institutional decision mechanism under centralization

decentralization and pollution spillovers evidence from the re drawing of county borders in brazil decentralization can improve service delivery but it can also generate externalities across jurisdictional boundaries we examine the nature and size of water pollution externalities as rivers flow across jurisdictions panel data on water pollution in brazilian rivers coupled with county splits that change the locations of borders allow us to identify the spatial patterns of pollution as rivers approach and cross borders controlling for fixed effects and trends specific to each location the theory of externalities predicts that pollution should increase at an increasing rate as the river approaches the downstream exit border that there should be a structural break in the slope of the pollution function at the border and that a larger number of managing jurisdictions should exacerbate pollution externalities we find support for all four predictions in the data satellite data on growth in night time lights along rivers show that local authorities allow more settlements to develop close to rivers in the downstream portions of counties which is the likely underlying mechanism the border effects on pollution are not as pronounced when the cost of inter jurisdictional coordination is lower

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

clientelism in indian villages abstract we study the operation of local governments panchayats in rural maharashtra india using a survey that we designed for this end elections are freely contested fairly tallied highly p

does the labour market explain lower female schooling in india labour market discrimination against women and parental discrimination against daughters are two of the most commonly cited explanations of the gender gap in education in developing countries this study empirically tests the labour market explanation for india using recent household survey data the results reveal substantial omitted family background bias in the estimates of rates of return to education the findings suggest that as well as overall labour market discrimination girls face poorer economic incentives to invest in schooling than boys because they reap lower labour market returns to education than boys

the disadvantaged incumbents estimating incumbency effects in indian state legislatures this paper estimates the incumbency effects using a large dataset on state legislative elections in india during 1975 2003 i use a regression discontinuity design rdd that estimates the causal effect of incumbency by comparing candidates in closely fought elections i find that there is a significant disadvantage to incumbency in indian state legislative elections and the adverse effect of incumbency has increased after 1991 also the incumbency disadvantage is higher in states that have lower availability of public goods such as health centers and lower employment poverty and per capita income

electoral competition and special interest politics have fixed positions on some issues but vary their positions on others in order to attract votes and campaign contributions in this context we examine whether special interest groups are governed by an electoral motive or an influence in their campaign giving and how their contributions affect the equilibrium platforms we show that each party is induced to behave as if it were maximizing a weighted sum of the aggregate welfares of informed voters and members of special interest groups the party that is expected to win a majority of seats caters more to the special interests

regulation with 20 20 hindsight heads i win tails you lose regulators are commonly accused of using 20 20 hindsight to punish a firm for bad outcomes rather than bad decisions it is often thought that such penalties lead to underinvestment by the firm i find that this expectation is not borne out when retrospective review is based on the firm s avoided costs in a joskow type model hindsight review mitigates the firm s tendency to build oversized risky projects moving the firm closer to the cost minimizing level of investment in a rate of return model the firm s allowed rate of return may have to be increased to keep expected profits nonnegative if this is done hindsight review does not affect the firm s investment level but it does correct the risk neutral firm s tendency to pay an excessive premium to eliminate construction cost uncertainty

accountability and decentralisation in government an incomplete contracts model this paper approaches the question of the appropriate level of decentralisation of power in government as a problem in the allocation of control rights under incomplete contracts the model of the paper compares allocations of power to local central and regional government as alternative means of motivating governments to act in the interests of citizens centralisation allows benefits from policy coordination but has costs in terms of diminished accountability which can be precisely defined as the reduced probability that the welfare of a given region can determine the re election of the government the model is extended to allow for conflicts of interest within regions and externalities between central and local governments in a federation it is also applied to determining levels of fiscal transfer between localities and to circumstances where governments may act as leviathans appropriating resources for their own use

decentralization and the productive efficiency of government evidence from swiss cantons advocates of fiscal decentralization argue that among other benefits it can increase the efficiency of delivery of government services this paper is one of the first to evaluate this claim empirically by looking at the association between expenditure decentralization and the productive efficiency of government using a data set of swiss cantons we first provide careful evidence that expenditure decentralization is a powerful proxy for legal local autonomy further panel regressions of swiss cantons provide robust evidence that more decentralization is associated with higher educational attainment we also show that these gains lead to no adverse effects across education types but that male students benefited more from educational decentralization closing for the swiss case the gender education gap

whose money is it anyway ingroups and distributive behavior abstract price theory is often used to explain reactions to rebates and subsidies that are meant to encourage charitable giving this paper describes the results of a laboratory experiment that tests standard price theory alongside an alternative perspective based on research on the perceptions and behavior of ingroups using a modified dictator game we find that rebates that decrease the price of giving only increase amounts given when they are exogenously funded by the experimenters when rebates are funded by members of one s group the decreased price of giving does not lead to increased amounts given the result suggests that the presence of an ingroup mentality can mediate the relationship between giving and price

the allocation of publicly provided goods to rural households in india on some consequences of caste religion and democracy abstract what determines the allocation of publicly provided goods to rural households in india although empirically driven this paper draws on the characteristics of india s institutional structure and the implications of existing literature for framing the answer to this question we confront the main empirical implications drawn from this framework with a unique data set which brings together widely used district data with a recently constructed data set on political participation we identify three robust determinants of this allocation process formal and informal characteristics of each state allocation mechanism selectivity in the allocations against muslims and scheduled castes and bureaucratic rules and behavior

from local strongman to facilitator institutional incentives for participatory municipal governance in latin america efforts to engage citizens in democratic forms of governance in developing societies are complicated by deeply rooted socioeconomic and political inequalities in this article the authors analyze

political connections and social networks in targeted transfer programs evidence from rural ethiopia abstractdespite increasingly large scale social protection programs in africa we have limited evidence on the local political economy of their allocation we investigate community based processes for food aid allocation and the role of political and social networks using the case of ethiopia in the aftermath of a serious drought in 2002 local political authorities are in charge of food transfers in terms of free food aid or food for work programs we find that although targeting is clearly imperfect free food aid is responsive to need as well as targeted to households with less access to support from relatives or friends we also find a strong correlation with political connections households with close associates in official positions have more than a 12 higher probability of obtaining free food than households that are not well connected this effect is large someone without political connections has the same probability of getting food aid as someone more than twice as rich but with these conne

political cycles in a developing economy effect of elections in indian states the author studies the effect of state legislative assembly elections on the policies of state governments in 14 major states of india from 1960 to 1996 she identifies the effect of the timing of elections using an instrument for the electoral cycle that distinguishes between constitutionally scheduled elections and midterm polls she contrasts two levers of policy manipulation fiscal policy and public service delivery to distinguish between alternative models of political cycles the predictions of three models are tested 1 populist cycles to woo uninformed and myopic voters 2 signaling models with asymmetric information 3 a moral hazard model with high discounting by political agents the empirical results for fiscal policy show that election years have a negative effect on some commodity taxes a positive effect on investment spending but no effect on deficits primarily because consumption spending is reduced with regard to public service delivery elections have a positive and large effect on road construction by state public works departments strikingly the fiscal effects are much smaller than the effect on roads the author argues that the pattern of evidence is inconsistent with the predictions of models of voter myopia and asymmetric information she explores an alternative moral hazard model in which the cycle is generated by high political discounting and career concerns persuade politicians to exert greater effort in election years on the management of public works

investors facing opportunistic governments is it really good to know the market before investing when a government cannot commit to future policies investors face the risk of opportunistic behavior in addition to uncertain market conditions we show that although reducing market uncertainty is sometimes essential for investment it may aggravate problems of opportunism the better informed the investor is before investing the more information the government can infer from observing that investment takes place in turn enabling more efficient rent extraction this signaling effect can dominate if the investor receives too accurate information before investing the only equilibrium is the one in which no investment occurs jel classification d82 l51

do formula based intergovernmental transfer mechanisms eliminate politically motivated targeting evidence from ghana abstract various countries have adopted formulas for determining intergovernmental transfers as a strategy to limit the role of political considerations in resource allocation in this paper we investigate a formula based system of allocating resources from a central government to local governments to determine whether the political characteristics of recipient areas have any bearing on their allocation specifically we study the sharing of resources of the district assemblies common fund dacf in ghana amongst the country s district governments over the period 1994 to 2005 we find evidence that the mechanism does not eliminate politically motivated targeting of the grants per capita dacf grants were higher in districts where vote margins in the previous presidential election were lower suggesting that swing districts were targeted we find evidence that dacf formula indicators and their weighting were chosen and amended to produce politically desired patterns of transfers

rent seeking spillovers and the benefits of decentralization abstract in the presence of spillovers decentralized provision of local public goods may lead to a higher surplus than centralized provision even though localities have identical preferences indeed free riding costs associated to decentralization can be lower than the costs of rent seeking and influence activities under centralization actually centralization yields a higher level of regional surplus only if both the spillover effect from local public spending is sufficiently large and the elasticity of the influence function is sufficiently small

political market characteristics and the provision of educational infrastructure in north india in this paper we are concerned with the provision of schools in rural north india particularly with whether such provision is determined by the demographic and economic characteristics of the region or whether local democracy also plays a role we find that the probability that a governing party loses an election has a positive effect on the provision of schooling infrastructure while the margin of victory of the governing party has a negative effect political reservation for members of the scheduled castes scs has a positive effect on schooling infrastructure in villages with a large sc population but a negative effect overall

what determines access to piped water in rural areas evidence from small scale supply systems in rural brazil summary this paper investigates whether small scale water supply systems implemented and operated by water user associations increase access to piped water supply in rural brazil by more than systems by local governments starting from 15 to 16 in the year 2000 access rates in rural areas with water user associations increased to 33 4 in 2010 in areas with local government supply systems access rates only increased to 24 9 based on data from brazilian census and the national water and sanitation survey the empirical analysis in this paper shows that the observed difference is effectively due to project type choice additionally it points toward higher accountability as a potential reason for better results of community based projects in municipalities where social groups requested a new system before the local government started implementation and therefore public awareness for the project was higher the increase in access rates is comparable to the increase in municipalities with water user association projects the same is true if local media is present or political competition in local elections is higher as the effect of project type on access rates might be confounded by simultaneous drivers of project type choice and access rates the quantitative analysis is based on a difference in difference estimator in combination with kernel matching to overcome the endogeneity of project type the treatment effect revealed by this analysis is robust to various specification changes and the robustness checks show no structural differences between treatment and control groups that could bias the results the calculation of matching weights for the kernel matching is informed by semi structured interviews with academics and sector experts in brazil explaining the determinants of project choice the interviews highlight the political economy behind infrastructure expansion in rural brazil

electoral competition with informed and uninformed voters i present a model of electoral competition in which candidates raise campaign contributions by choosing policies that benefit interest groups and then expend those contributions to influence voters who are uninformed about the policies informed voters however vote based on those policies so candidates face a trade off between choosing a policy to generate funds to attract the uninformed vote and choosing a policy to attract the informed vote electoral equilibria are characterized for two categories of policies particularistic and collective in the case of particularistic policies the equilibrium policies of the candidates are separated if the proportion of uninformed voters is sufficiently high and the degree of separation is an increasing function of that proportion the model is extended to include the public financing of elections and incumbency advantages for the case of collective policies the candidates locate at the median of the ideal points of the informed voters and contributions are zero