time consistent public policy in this paper we study how a benevolent government that cannot commit to future policy should trade off the costs and benefits of public expenditure we characterize and solve for markov perfect equilibria of the dynamic game between successive governments the characterization consists of an inter temporal first order condition a generalized euler equation for the government and we use it both to gain insight into the nature of the equilibrium and as a basis for computations for a calibrated economy we find that when the only tax base available to the government is capital income an inelastic source of funds at any point in time the government still refrains from taxing at confiscatory rates we also find that when the only tax base is labour income the markov equilibrium features less public expenditure and lower tax rates than the ramsey equilibrium

politics and efficiency of separating capital and ordinary government budgets we analyze a golden rule that separates capital and ordinary account budgets and allows a government to finance only capital items with debt many national governments followed this rule in the eighteenth and nineteenth centuries and most u s states do today we study an overlapping generations economy where majorities choose durable and nondurable public goods in each period when demographics imply even moderate departures from ricardian equivalence the golden rule substantially improves efficiency examples calibrated to u s demographics show greater improvements at the state level or with nineteenth century demographics than under current national demographics

characterising deindustrialisation an analysis of changes in manufacturing employment and output internationally deindustrialisation is typically conceptualised as a decline in manufacturing as a share of total employment from a kaldorian perspective deindustrialisation could have negative implications for long run growth given the special growth pulling properties of manufacturing however defining deindustrialisation purely in terms of employment share is conceptually limiting given that some of the kaldorian processes operate primarily through output rather than employment as well as blunting empirical analysis by not focussing enough on changes in manufacturing share of gross domestic product gdp this study develops a new method using decomposition techniques to analyse changes in manufacturing employment levels and shares in 48 countries over periods of deindustrialisation the analysis separates out changes in the levels and shares of employment manufacturing into components associated with changes in the share of manufacturing in gdp the growth of manufacturing value added the labour intensity of manufacturing production and economic growth the results indicate that in most cases the decline in manufacturing employment is associated primarily with falling labour intensity of manufacturing rather than an overall decline in the size or share of the manufacturing sector we suggest that deindustrialisation should appropriately be defined in terms of a sustained decline in both the share of manufacturing in total employment and the share of manufacturing in gdp copyright the author 2008 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

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

kaldor s laws and spatial dependence evidence for the european regions pons novell j and viladecans marsal e 1999 kaldor s laws and spatial dependence evidence for the european regions reg studies 33 443 451 in this paper we provide an outline of kaldor s growth model and test its relevance to the economic experience of european regions during the period 1984 92 kaldor s first law asserts that manufacturing is the engine of economic growth his second proposition also known as verdoorn s law states that there is a strong positive relation between manufacturing productivity growth and manufacturing output growth kaldor s third law holds that overall productivity growth is positively related to manufacturing output growth and negatively related to employment in non manufacturing sectors the empirical results corrected for the presence of spatial autocorrelation indicate that kaldor s second and third laws are compatible with the economic growth of european regions during the period 1984 92 pons novell j et viladecans marsal e 1999 les lois de kaldor et la

ten commandments for a fiscal rule in the e m u abstract fiscal rules in a monetary union should 1 be simple 2 ensure the solvency of the state 3 relate to the consolidated general government and central bank 4 be neutral as regards the size of the public sector 5 avoid pro cyclical behaviour of the fiscal policy instruments 6 make sense also in the long run 7 allow for important differences in economic structure and initial conditions 8 aggregate into behaviour that makes sense at the level of the union as a whole 9 be credible and 10 be enforced impartially and consistently the paper reviews the rules of the stability and growth pact the uk s golden rule and sustainable investment rule and buiter and grafe s permanent balance rule and enhanced permanent balance rule from the perspective of how well they meet these 10 criteria key words fiscal rules stability and growth pact golden rule financial sustainability journal of economic literature classification system e61 e62 e63 f33 f42 h62 h87 e32 e42 willem h buiter european bank for reconstruction and development one exchange square london ec2a 2jn united kingdom tel 44 0 20 7336 6805 fax 44 0 20 7338 6110 1 e mail buiterw ebrd com office e mail willembuiter whsmithnet co uk home www http www nber org wbuiter

state responses to fiscal crises the effects of budgetary institutions and politics this paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits more restrictive state fiscal institutions such as no deficit carryover rules and tax and expenditure limitations are correlated with more rapid fiscal adjustment to unexpected deficits political factors are also important when a single party controls the state house and the governorship deficit adjustment is much faster than when party control is divided in gubernatorial election years tax increases and spending cuts are both significantly smaller than at other times

rental housing markets the incidence and duration of vacancy and the natural vacancy rate abstract new intermetropolitan and time series data from the bls are used to derive and model the incidence and duration of rental vacancies and to assess their importance to the price adjustment mechanism for rental housing research findings indicate that duration varies with measures of msa housing costs and housing stock heterogeneity while incidence varies with measures of population mobility public housing availability and population growth results support a more general specification of rental price adjustment in which the rate of real rent change reflects deviations in observed vacancy incidence and duration from their equilibrium levels the research provides new estimates of equilibrium vacancy rates for a large set of metropolitan areas over the 1987 1996 period

public infrastructure investment output dynamics and balanced budget fiscal rules abstract we study the dynamic macroeconomic effects of public infrastructure investment under a balanced budget fiscal rule using an overlapping generations model of a small open economy the government finances public investment by employing distortionary labor taxes the balanced budget rule implies a negative short run output multiplier that exceeds in absolute terms the positive long run output multiplier larger public capital spillovers sharpen the intertemporal output tradeoff in contrast to conventional results regarding public investment shocks we obtain dampened cyclical responses for plausible parameter values the cyclical dynamics arise from the interaction between the labor tax rate the tax base and the intergenerational spillover effects we show that financing scenarios involving public debt creation can substantially reduce the short run output contraction and the transitional macroeconomic fluctuations induced by public investment

neuroeconomic foundations of trust and social preferences initial evidence neuroeconomics merges methods from neuroscience and economics to better understand how the human brain generates decisions in economic and social contexts neuroeconomics is part of the general quest for microfoundations in this case the microfoundation of individual decision making in social contexts the economic model of individual decision making is based on three concepts the action set preferences and beliefs economists assume that an individual will choose his preferred action for a given set of available actions and a given belief about the states of the world and the other players actions neuroeconomics provides a microfoundation for individual beliefs preferences and behavior it does so by examining the brain processes associated with the formation of beliefs the perception of the action set and the actual choice moreover since the set of available actions can be framed in different ways and different frames of the same action set sometimes elicit different behaviors neuroeconomics may also contribute to a deeper understanding of framing effects this paper discusses recent neuroeconomic evidence related to other regarding nonselfish behaviors and the decision to trust in other people s nonselfish behavior as we will show this evidence supports the view that people derive nonpecuniary utility i from mutual cooperation in social dilemma sd games and ii from punishing unfair behavior in these games thus mutual cooperation that takes place despite strong free riding incentives and the punishment of free riders in sd games is not irrational but better understood as rational behavior of people with corresponding social preferences finally we report the results of a recent study that examines the impact of the neuropeptide oxytocin ot on trusting and trustworthy behavior in a sequential sd animal studies have identified ot as a hormone that induces

fiscal news state budget rules and tax exempt bond yields abstract this paper investigates how state fiscal institutions such as balanced budget rules and restrictions on state debt issuance mediate the bond market reaction to state fiscal news we analyze data on the yields of bonds issued by different states as reported in the chubb relative value survey along with data on state budget forecasts for the period 1988 1998 we find that unexpected deficits are correlated with higher state bond yields this effect is smaller for states with tight antideficit rules than for states without these fiscal rules unexpected deficits have a particularly large effect in raising bond yields of states with tax limits these results suggest that bond market participants view fiscal institutions as relevant in assessing the risk characteristics of tax exempt bonds and that the economic significance of these institutions depends on the state s economic and fiscal circumstances

the intergenerational state education and pensions allocation is inefficient when generations overlap this failure can be mitigated by properly designed social arrangements we show that public financing of education and public pensions can be designed to implement an intergenerational transfer scheme supporting the complete market allocation neither the public financing of education nor the pension scheme we consider resemble standard ones in our mechanism via the public education system the young borrow from the middle aged to invest in human capital they pay back the debt via a social security tax the proceedings of which finance pension payments when the complete market allocation is achieved the rate of return implicit in this borrowinglending scheme should equal the market rate of return

optimal taxation without state contingent debt in an economy studied by lucas and stokey tax rates inherit the serial correlation structure of government expenditures belying barro s earlier result that taxes should be a random walk for any stochastic process of government expenditures to recover a version of barro s random walk tax smoothing outcome we modify lucas and stokey s economy to permit only risk free debt having only risk free debt confronts the ramsey planner with additional constraints on equilibrium allocations beyond one imposed by lucas and stokey s assumption of complete markets the ramsey outcome blends features of barro s model with lucas and stokey s in our model the contemporaneous effects of exogenous government expenditures on the government deficit and taxes resemble those in lucas and stokey s model but incomplete markets put a near unit root component into government debt and taxes an outcome like barro s however we show that without ad hoc limits on the government s asset holdings outcomes can diverge in importa

how significant is intersectoral outsourcing of employment in south africa south africa like many other middle income countries as well as most upper income countries has seen an increase in services and fall in manufacturing as shares of total employment there has been speculation about the extent to which these changes actually represent a genuine structural shift as opposed to a statistical artifact deriving from the domestic outsourcing of activities from manufacturing to services very limited evidence is available as to how much of the apparent changes in the sectoral composition of employment are explained by intersectoral outsourcing this article develops a methodology using household and labor survey data to analyze the extent of intersectoral outsourcing of specific labor intensive activities in south africa from 1997 2007 it is shown that the relatively high growth in services employment is driven by expansion of employment of cleaners and security guards and in particular by outsourcing type reallocation of these activities from manufacturing and the public sector toward private services once outsourcing is accounted for employment seems to have grown at similar rates in manufacturing and in private services the analysis has implications for understanding changes in the sectoral structure of middle income economies and whether services employment is as dynamic as it appears to be copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

growth friendly fiscal rules safeguarding public investment from budget cuts through fiscal rule design abstract we study patterns of public investment behavior during fiscal consolidations in seventy five advanced and emerging economies during 1990 2018 and find that results differ significantly depending on fiscal rule design fiscal rules can be flexible meaning that they include mechanisms to accommodate exogenous shocks e g cyclically adjusted fiscal targets well defined escape clauses and differential treatment of investment expenditures or rigid meaning they establish numerical limits on fiscal targets without taking into account flexible features we find that in countries with either no fiscal rule or with a rigid fiscal rule a fiscal consolidation of at least 2 percent of gdp is associated with an average 10 percent reduction in public investment instead in countries with flexible fiscal rules the negative effect of fiscal adjustments on public investment vanishes which implies that flexible rules protect public investment during consolidation episodes the corollary is that the design of fiscal rules can add a growth friendliness dimension to the fiscal sustainability objective that has typically been the focus of fiscal rules in the past provided public investment is productive

taxation and the tiebout model the differential effects of head taxes taxes on land rents and property taxes on the theory of state and local public finance is the seminal paper by charles tiebout 1956 tiebout constructed a multijurisdictional model in which independent local governments offer a wide variety of expenditure and tax policies and perfectly mobile consumers reveal their preferences for local public goods through their choice of residential community he argued that under such circumstances local public service provision would be efficient the tiebout model has formed the basis of a vast number of subsequent articles in the state and local public finance literature and has also been very influential in urban and regional economics the efficiency properties of various tiebout type models of local public good provision have been examined and the role of politics in these models has been debated at length in this literature of more direct relevance to this paper however is the fact that although tiebout had little to say directly about taxation simply assuming the existence of head taxes subsequent analyses have used adaptations of this model to examine the effects of local head taxes land taxes and property taxes it is the literature on the efficiency and distributional effects of alternative local taxes that is the subject of this survey 1

equilibrium political budget cycles political business cycle theories generally rely on nominal rigidities and voter myopia this paper offers an equilibrium theory that preserves some basic insights from earlier models though with significant refinements the political budget cycle emphasized here is in fiscal policy rather than output and inflation it arises via a multidimensional signal process one can consider the welfare implications of proposals to mitigate the cycle and the effects of altering the electoral structure copyright 1990 by american economic association

changing the price of pork the impact of local cost sharing on legislators demands for distributive public goods abstract the provision of public services through national legislatures gives legislators the chance to fund locally beneficial public projects using a shared national tax base nationally financed and provided local congestible public goods will be purchased at a subsidized price below marginal cost and may be inefficiently too large as a consequence an important assumption behind this inefficiency is that national legislators in fact demand more of the locally beneficial project as the local price for projects declines this paper provides the first direct test of this important assumption using legislators project choices following the passage of the water resources development act of 1986 wrda 86 we find legislators chosen water project sizes do fall as the local cost share rises with a price elasticity of demand ranging from 0 81 for flood control and shoreline protection projects to 2 55 for large navigation projects the requirement of wrda 86 that local taxpayers contribute a greater share to the funding of local water projects reduced overall proposed project spending in our sample by 35 and the federal outlay for proposed project spending by 48

ageing government budgets retirement and growth we analyze the short and long run effects of demographic ageing increased longevity and reduced fertility on per capita growth the olg model captures direct effects working through adjustments in the savings rate labor supply and capital deepening and indirect effects working through changes of taxes government spending components and the retirement age in politico economic equilibrium growth is driven by capital accumulation and productivity increases fueled by public investment the closed form solutions of the model predict taxation and the retirement age in oecd economies to increase in response to demographic ageing and per capita growth to accelerate if the retirement age were held constant the growth rate in politico economic equilibrium would essentially remain unchanged due to a surge of social security transfers and crowding out of public investment

voting on the budget deficit comment textabstractin this comment it is argued that a balanced budget rule may cause underinvestment as a consequence such a rule is not ex ante efficient in order to achieve the ex ante optimal outcome it would be necessary to add an extra rule for the level of public investment unfortunately however such an investment rule is likely to be very difficult to implement in practice when there are no rules to prevent underinvestment it is no longer clear whether a balanced budget rule is beneficial or not in some cases the cost of low levels of investment outweigh the benefits of a balanced budget

a positive theory of fiscal deficits and government debt this paper considers an economy in which policymakers with different preferences alternate in office as a result of elections government debt is used strategically by each policymaker to influence the choices of his successors if different policymakers disagree about the desired composition of government spending between two public goods the economy exhibits a deficits bias that is debt accumulation is higher than it would be with a social planner the equilibrium level of debt is larger the larger is the degree of polarization between alternating governments and the less likely it is that the current government will be re elected

public private partnerships and government spending limits abstract we consider public private partnerships in which a public official selects a project that is then developed and operated by a private contractor we derive optimal public accounting rules when the official s choice among projects is biased by ideology or social ties or because of pandering to special interests we give particular emphasis to how the rules should constrain the official s incentive to understate the costs of her pet projects in the basic model we show that the optimal accounting rule takes the form of a budget cap with a project s expected cost modified to reflect the official s distortionary incentives if the project can be partially financed privately then fixed price contracts can serve to curb political misbehavior by securitizing public sector liabilities we also consider the possibility that development and operations are each handled by different contractors such unbundling deprives public accountants of forward information about future costs but can prevent the official from funneling hidden future rents to contractors

manufacturing and economic growth in the united states kaldor s growth laws are applied to the post world war ii united states each variable employed in the time series analysis is smoothed with a moving average this procedure successfully mitigates the effects of short term cyclical changes and emphasizes long term economic growth indicate that kaldor s laws are compatible with the economic growth of united states

an econometric model of housing price permanent income tenure choice and housing demand abstract this paper addresses the determination of housing price permanent income tenure choice and housing demand full housing demand elasticities incorporate the interactive effects among the four stages of the model price and income have major effects in the tenure choice equation sociodemographic variables such as age have complex effects that may be lost in simpler forms of estimation

optimal fiscal and monetary policy in an economy without capital abstract this paper is concerned with the structure and time consistency of optimal fiscal and monetary policy in an economy without capital in a dynamic context optimal taxation means distributing tax distortions over time in a welfare maximizing way for a barter economy our main finding is that with debt commitments of sufficiently rich maturity structure an optimal policy if one exists is time consistent in a monetary economy the idea of optimal taxation must be broadened to include an inflation tax and we find that time consistency does not carry over an optimal inflation tax requires commitment by rules in a sense that has no counterpart in the dynamic theory of ordinary excise taxes the reason time consistency fails in a monetary economy is that nominal assets should from a welfare maximizing point of view always be taxed away via an immediate inflation in a kind of capital levy this emerges as a new possibility when money is introduced into an economy without capital

international coordination of fiscal policy in limiting economies we examine the limiting behavior of cooperative and noncooperative fiscal policies as countries market power goes to zero we show that these policies converge if countries raise revenues through lump sum taxation however if there are unremovable domestic distortions such as distorting taxes there can be gains to coordination even when a single country s policy cannot affect world prices these results differ from the received wisdom in the optimal tariff literature the key distinction is that contrary to the tariff literature the spending decisions of governments are explicitly modeled

why a stubborn conservative would run a deficit policy with time inconsistent preferences a conservative government in favor of a low level of public consumption knows that it will be replaced by a government in favor of a larger level of public consumption we show that the resulting level of public consumption is in between the levels the two governments would choose if each were in power both in the present and in the future in particular we show that if the conservative government is more stubborn in a particular sense than the succeeding government the conservative government will borrow more than it would had it remained in power in the future

a dynamic theory of public spending taxation and debt this paper presents a dynamic political economy theory of public spending taxation and debt policy choices are made by a legislature consisting of representatives elected by geographically defined districts the legislature can raise revenues via a distortionary income tax and by borrowing these revenues can be used tofinance a national public good and district specific transfers interpreted as pork barrel spending the value of the public good is stochastic reflecting shocks such as wars or natural disasters in equilibrium policy making cycles between two distinct regimes business as usual in which legislators bargain over the allocation of pork and responsible policy making in which policies maximize the collective good transitions between the two regimes are brought about by shocks in the value of the public good in the long run equilibrium tax rates are too high and too volatile public good provision is too low and debt levels are too high in some environments a balanced budget requirement can improve citizen welfare

economic growth and kaldor s law the case of turkey 1925 78 in this paper kaldor s enine of growth hypothesis is examined and its validity is tested forr the turkish economy the results obtained regardless of the specification and estimation techniques used consistently support the hypothesis

crowd out effects of place based subsidized rental housing new evidence from the lihtc program abstract since its inception in 1987 the low income housing tax credit lihtc program has ballooned into the largest ever source of subsidized construction of low income housing in the united states accounting for one third of all recent multi family rental construction this paper examines the crowd out effects of this increasingly important source of low moderate income housing to do so we analyze the impact of lihtc construction at three different levels of geography msa county and 10 mile radius circles this allows us to employ increasingly extensive geographic fixed effects that help to difference away unobserved factors political variables are also used as instruments to further facilitate identification in all of our models iv estimates yield substantially greater crowd out than ols confirming the endogenous attraction of lihtc development to areas ripe for new construction our most robust iv estimates indicate that nearly 100 of lihtc development is offset by a reduction in the number of newly built unsubsidized rental units although the confidence band around this point estimate allows for less dramatic assessments additional estimates suggest that lihtc development has a much more moderate impact on construction of owner occupied housing but these estimates are imprecise overall while lihtc development may well affect the location of low moderate income rental housing opportunities our estimates suggest that the impact of the program on the number of newly developed rental housing units appears to be small

rent burden and the great recession in the usa in the aftermath of the recent recession the percentage of households facing rent burden in the usa reached historically high levels while cost burden for owners has shrunk this study uses two panels from the survey of income and program participation sipp to compare the prevalence distribution and household responses to the phenomenon of rent burden in the usa in the years immediately before and after the great recession results suggest that rent burden has become more prevalent after the recession and that income household composition and location are major drivers of this phenomenon both before and after the recession results also indicate that exiting rent burden was more difficult in the years after the recession and that an increasingly common coping mechanism for rent burdened households is to increase their household sizes these results indicate that renters have experienced increased financial stress related to their housing this finding is notable given the lack of policy responses t

rent vouchers and the price of low income housing since the early 1980s low income housing subsidies have increasingly shifted towards vouchers which allow recipients to rent in the private market by 1993 vouchers subsidized as many households as lived in traditional housing projects although most low income households did not receive any subsidies this study investigates whether this policy has raised rents for unsubsidized poor households as many analysts predicted when the program was conceived the main finding is that low income households in metropolitan areas with more vouchers have experienced faster rent increases than those where vouchers are less abundant in the 90 biggest metropolitan areas vouchers have raised rents by 16 percent on average a large effect consistent with a low supply elasticity in the low quality rental housing market considered as a transfer program this result implies that vouchers have caused a 8 2 billion increase in the total rent paid by low income non recipients while only providing a subsidy of 5 8 billion to recipients resulting in a net loss of 2 4 billion to low income households

forward and backward intergenerational goods why is social security good for the environment this paper studies the ability of nonmarket institutions to invest optimally in forward intergenerational goods figs such as education and the environment when agents are selfish or exhibit paternalistic altruism we show that backward intergenerational goods bigs such as social security play a crucial role in sustaining investment in figs without them investment is inefficiently low but with them optimal investment is possible we also show that making the provision of bigs mandatory crowds out the voluntary provision of figs and that population aging can increase investment in figs

kaldorian approach to greek economic growth in the last 30 years greece has experienced a rapid rate of economic growth which has transformed the economy and enabled it to become a member of the eec specifically greece transformed itself from an agricultural economy with virtually no industrial base to an economy with a significant industrial sector and consequently a relatively high income per capita one can explain this on the lines of a kaldorian framework in this paper we provide an outline of kaldor s growth model and test its relevance to the economic experience of greece during the 1967 1988 period the empirical results suggest that the model can adequately explain the developments in the economy to a considerable degree

migration the life cycle and state benefits how low is the bottom i show that among women likely to use welfare movers move to higher benefit states i also find that the probability likely welfare users will move at all is lower in higher benefit states this effect is concentrated early in the life cycle as theory predicts i construct a theoretical framework to measure the impact of welfare migration on optimal state benefits simulation results suggest little impact in higher benefit states but possibly a more substantial impact in other states finally evidence suggests little reason for concern due to welfare migration in using cross state variation in welfare generosity to identify incentive effects of the welfare system on other outcome variables

what happens to household formation in a recession abstract while many studies have investigated the determinants of housing demand very few studies have focused on how economic conditions affect the formation of potential households directly potential households may choose to delay entry into the housing market by remaining with one s parents during times of economic hardship or by combining with other persons to share housing costs using a variety of modeling approaches we find that both the increase in the unemployment rate and the presence of recessions reduce the rate of household formation simulations suggest that these declines are substantively important for example in a recession the likelihood that a young adult will form an independent household falls by 1 9 points depending on the age of the person by way of comparison if an individual is unemployed the likelihood of leaving the parental home is up to 11 points lower

local public goods debt and migration abstract migration raises a potential free rider problem for the provision of durable local public goods if the latecomers can enjoy the public good without paying for it allowing communities to finance public goods by debt mitigates this problem since future immigrants have to share the burden of the debt however in equilibrium there will be over accumulation of local debt there may be more or less public good than at first best but conditional on the inefficiently high level of debt there will be too few public goods a competitive market for land reduces but does not in general eliminate the inefficiencies

the political economy of fiscal deficits and government production abstract this paper studies how disagreement over which goods government should provide affects resource allocation in the public sector an incumbent combines pre determined capital with labor to produce different goods in the current period and accumulates physical and financial capital for future production capital labor complementarity determines how anticipated political turnover shapes governments choice between saving in physical capital or financial assets turnover tends to render the stock of physical capital for public production too low and inefficiently combined with labor the main cost of political turnover is production inefficiency in the public sector not a suboptimal savings level

how to protect future generations using tax base restrictions this paper studies how to protect future generations from expropriation and to induce optimal investment in intergenerational public goods ipgs by introducing constitutional restrictions on the tax base the type of tax base restrictions that we consider places limits on the tax instruments that the government can use to raise revenue but not on the level of expenditures or debt we show that the introduction of a constitutional amendment requiring that ipgs and debt be financed with land taxes makes intergenerational expropriation impossible and for many cases of interest induces optimal investment in ipgs we also show that a weaker constitutional amendment requiring that ipgs be financed with land taxes but imposing no restrictions on how to finance the debt has a positive impact on ipgs but not on expropriation the paper also studies the political feasibility of these reforms we show that the first reform is not politically feasible since it hurts current generations but the weaker reform can induce a pareto improvement jel d1 d7

voting on the budget deficit this paper analyzes a model in which a group of rational individuals votes over the composition and time profile of public spending all voters agree that a balanced budget is ex ante optimal however if there is disagreement between current and future majorities a balanced budget is not a political equilibrium under majority rule under certain conditions a majority of the voters favors a budget deficit and the equilibrium deficit is larger the greater is the polarization among voters copyright 1990 by american economic association

a kaldorian approach to regional economic growth in china kaldor s engine of growth hypothesis is examined in the case of the chinese economy china has in the last decade experienced a rapid industrialization and very strong economic growth using regional data of this growth process the three kaldorian laws of economic growth are tested the empirical results support the hypothesis there seems to be an especially strong relation between productivity and industrial growth

extremely low income households housing affordability and the great recession the effects of the great recession on housing equity and homeownership have been well documented however we know little about how rental households fared and the efficacy of housing subsidies in addressing affordability gaps this paper examines the extent to which rental housing became less affordable for extremely low income eli households those earning less than 30 of the area median income ami i then run regression models to determine the local characteristics most strongly associated with larger affordability gaps with a focus on whether housing subsidies are effective at combating such gaps rental affordability gaps became more pronounced during the great recession in nearly 70 of the counties in my sample there was an increase from 2007 to 2010 in the number of eli households per affordable rental unit across the country the increase was 17 a dramatic increase in only three years there is considerable variation across the country with acute affordability crises often concentrated in the south particularly florida regression models provide compelling evidence that housing vouchers public housing and project based section 8 subsidies play an important role in limiting the extent to which large numbers of eli households are competing for a shortage of low cost rental units however these programmes do not respond quickly to local needs such as those brought about by the great recession a pilot study where local housing authorities had funding to be more agile and responsive would be an important step toward crafting better policy