implications of bid design and willingness to pay distribution for starting point bias in double bounded dichotomous choice contingent valuation surveys we examine starting point bias in double bounded dichotomous choice contingent valuation surveys we investigate 1 the seriousness of the biases for the location and scale parameters of the willingness to pay wtp in the presence of starting point bias 2 whether or not these biases depend on the distribution of wtp and on the bid design and 3 how well a commonly used diagnostic for starting point bias a test of the null that bid set dummies entered in the right hand side of the wtp model are jointly equal to zero performs under various circumstances monte carlo simulations suggest that the effect of ignoring starting point bias depends on the bid design and on the true distribution of wtp a well balanced symmetric bid design may result in very modest biases even when the anchoring mechanism is very strong the power of bid set dummies in detecting starting point bias is low they tend to account for misspecifications in the distribution assumed by the researcher for the latent wtp rather than capturing the presence of starting point bias

semi nonparametric distribution free dichotomous choice contingent valuation abstract we apply a semi nonparametric distribution free estimator for binary discrete response data to the estimation of a dichotomous choice contingent valuation model using this estimator mean and median compensating and equivalent variation can be consistently estimated without making nontheoretically motivated assumptions on consumer preferences the approach is illustrated using a contingent valuation survey of willingness to pay for reduction of risk of premature death due to exposure to hazardous waste we find that a conventional parametric estimator and the proposed estimator give similar estimates of unconditional wtp but that conditional on explanatory variables the estimates are quite different

revolution evolution and local government structure an empirical analysis of london conventional analyses of local government structure focus on the revolutionary changes that result from deliberate reorganisations we propose a new perspective on structural change that emphasises the importance of evolutionary processes as well as radical reforms evolutionary changes in structure are caused for example by population growth or decline and reallocations of service responsibilities between tiers the argument is illustrated by an empirical analysis of fragmentation and concentration in the structure of local government in london the evidence reveals that structural change is the norm rather than the exception it occurs even when the absolute number of local government tiers and units is constant

optimal inflation policy abstract this paper considers the problem of optimal long run monetary policy it shows that optimal inflation policy involves trading off two quite different considerations first increases in the rate of inflation tax the holding of many balances leading to a deadweight loss as excessive resources are devoted to economizing on cash balances second increases in the rate of inflation raise capital intensity as long as the economy has a capital stock short of the golden rule level increases in capital intensity raise the level of consumption ignoring the second consideration leads to the common recommendation that the money growth rate be set so that the nominal interest rate is zero taking it into account can lead to significant modifications in the full liquidity rule interactions of inflation policy with financial intermediation and taxation are also considered the results taken together suggest that inflation can have important welfare effects and that optimal inflation policy is an empirical question which depends on the structure of the economy

bargaining power of smaller states in germany s landerfinanzausgleich 1979 90 in this paper we explore the impact of politicalfactors on redistribution across the states in thegerman landerfinanzausgleich from a public choiceperspective the smaller states are supposed to have ahigher influence on decisions in the secondlegislative chamber due to a lower shadow price oftheir votes which implies a higher bargaining power as the federal government s policy depends on amajority in the second chamber there is an incentiveto buy smaller states votes controlling for gdp percapita we find statistically significant support forour hypotheses

fiscal illusion and the grantor government in canada recent work on the u s concludes that one or more illusions are responsible for the empirically observed flypaper effect using annual canadian data for the period 1962 84 we test the single illusion and dual illusion specifications currently in the literature while the empirical results support the dual illusion specification it is not the unambiguous choice over single illusion specifications as previously found further the nature of the grant system in canada raises questions about whether illusions or real factors produce the empirical results

generalized additive models for nonmarket valuation via revealed or stated preference methods single site recreation demand and dichotomous choice contingent valuation analyses are typically conducted by implementing models containing strong parametric assumptions which are rarely underpinned by theoretical arguments this work illustrates how these assumptions can be relaxed and the estimation conducted semiparametrically by using generalized additive models gams this approach directly estimates the degree of the variables nonlinearities from the data thereby avoiding subjective choices on the smoothing parameters and offering many advantages when compared to the conventional modeling techniques that dominate the environmental economics literature additionally this paper illustrates how gams can be specified to construct theoretically consistent willingness to pay measures jel c14 q51

legislative monopoly and the size of government if the economics profession had a fetish it would surely be competition unrestricted competition allows resources to flow to their most productive uses and maximizes the net welfare of society one of the few points virtually all modem economists would agree on is that with the possible exception of a few well defined special cases e g money production and public utilities they have never met an entry barrier they did not want to eliminate entry barriers facing potential competitors in markets reduce economic efficiency and generate social waste in a classic article tullock 2 extended this reasoning to the political process he makes the following argument lower entry barriers into politics e g lowered costs of entry into the legislature for potential entrants makes governmental decision making more competitive and tends to make p mc 2 competitive government will supply a higher level of public goods at lower tax prices taxes will therefore be lower holding other things equal in political jurisdictions which are more competitive while taxes will be higher in monopoly jurisdictions which will seek to exploit monopoly rents from taxpayers this reasoning makes the assumption that it is appropriate to model government as a kind of firm which provides public goods in exchange for tax revenues from taxpayer voters in such a setting increased competition would most likely produce increased efficiency in the provision of public goods and increase net social welfare buchanan 6 made a very different argument which while not directly intended to apply to the problem of the behavior of government may have direct bearing on those problems he was concerned with the social welfare effects of the monopolization of crime by organized criminal

fiscal decentralization and government size numerous studies have attempted to model the possible factors contributing to universal growth in public sectors this paper analyzes one device that appears capable of controlling some of that growth fiscal decentralization the results reported here also support the use of monopoly government assumptions in models of public policy

does foreign aid promote the expansion of government building on the literature on public finance i seek to advance our understanding of variations in government size by exploring the impact of official development assistance on fiscal policy i hypothesize that foreign aid operates in accordance with the flypaper effect systematically generating incentives and opportunities for the expansion of government spending results from a time series cross sectional regression analysis of growth in government spending over the 1970 99 time period are consistent with the hypothesis for middle and lower income nations aid represents an important determinant of government expansion looking at the tax and revenue side of the equation however reveals a more perverse pattern of response aid promotes not only increased spending but also reduced revenue generation the results have important implications from both a theoretical and policy perspective inter alia they point to the potentially self defeating nature of efforts to promote market oriented programs of state retrenchment via development assistance as well as to the importance of incorporating international transfers into future research on government spending

inflationary financing of public investment and economic growth abstract a theoretical model is constructed in order to explain particular historical experiences in which inflation acceleration apparently helped to spur a period of economic growth government financed expenditures affect positively the productivity growth in this model so that the distortionary effect of inflation tax is compensated by the productive effect of public expenditures we show that for some interval of money creation rates there is an equilibrium where money is valued and where steady state physical capital grows with inflation it is also shown that zero inflation and growth maximization are never the optimal policies

on a simple rule for the optimal inflation rate in second best taxation abstract the optimal inflation rate is analyzed in the framework of dynamic second best with endogenous factor prices it is shown that when the marginal excess burden of taxation is relatively small the optimal inflation rate is approximated by a simple rule the paper also analyzes the robustness of this rule to the specification of the model money as an input in utility or production

semiparametric approaches to welfare evaluations in binary response models applied welfare analysis is commonly based on mean or median benefit estimates however the whole conditional distribution of benefits is often of interest for policy makers this article compares the distributional information recovered by competing semiparametric methods results obtained using a valuation study for the improvement of water resources in brazil suggest that the semiparametric approaches are in line with each other capturing a rich heterogeneity structure that is ignored by the logit approach failure to take this structure into account may lead to the undue rejection of the project according to the kaldor hicks criterion

the cartelization of local governments intergovernmental competition can enhance efficiency centralization of government expenditures inhibits intergovernmental competition because it makes governments more homogeneous and so cartelizes local governments cartelization reduces tiebout competition and limits benchmark competition in which one government s performance can be compared with neighboring governments measuring fiscal centralization as the ratio of local to state and local government expenditures within the state the evidence shows that more fiscal decentralization is associated with higher levels of state per capita income cartelization of local governments negatively impacts income

fiscal decentralization and the size of government a european country empirical analysis this article is an original contribution to the understanding of the relationship between fiscal decentralization and government size using a panel data set of the eu 15 countries we analyse the effect of decentralization on aggregate national and subnational government sizes by separating the long run effects of decentralization from its short run dynamics in the long run tax autonomy reduces central expenditure but increases and to a greater extent subnational public expenditure leading to higher aggregate public expenditure we find also that vertical imbalances tend to increase the sizes of subnational national and aggregate governments

flexible functional form estimation of willingness to pay using dichotomous choice data abstract this paper introduces fully flexible semi nonparametric methods for calculating willingness to pay wtp bounded between zero and the respondent s income for dichotomous choice contingent valuation a method to estimate median wtp using fully flexible functional forms is also presented finally the numerical illustration demonstrates the importance of considering jensen s inequality in calculating wtp with nonlinear models

optimal monetary growth abstract in the absence of monetary superneutrality inflation affects capital accumulation and the demand for real balances this paper derives the combination of monetary and lump sum fiscal policy which maximizes the sum of discounted utilities of representative consumers in present and future generations under the optimal policy package the steady state has a zero nominal interest rate and has monetary contraction at the rate of intergenerational discount as the rate of intergenerational discount rate approaches zero optimal policy maximizes steady state utility of the representative consumer in this case the optimal steady state is characterized by a constant nominal money supply

public education supply and student performance this paper develops a model of public exchange whereby voters and education policy makers exchange with one another within school districts because school district consolidation lowers alternatives to voters parents consolidation is hypothesized to raise public education spending because weakened intergovernmental competition allows policy makers to promote their own utility rather than that of constituents models of public education spending and academic performance are estimated over 1988 1990 while evidence indicates little support for the traditional treatment of the leviathan hypothesis that greater competition lowers public spending this paper argues that education spending by itself does not fully provide a valid test of the leviathan hypothesis since spending by itself does not necessarily indicate the quality of public education programmes empirical evidence indicates that greater numbers of schools and school districts promote higher student achievement as evidenced by higher math and v

searching for leviathan comment and extension in a recent article wallace oates 1985 investigated whether fiscal decentralization tended to act as a constraining influence on the overall size of the public sector this hypothesis has been advanced by several alternative theories of government behavior including richard musgrave s 1959 model of how the distribution function of government would be carried out by subnational governments geoffrey brennan and james buchanan s 1980 leviathan model and the more traditional public choice model for example walter hettich and stanley winer 1984 all contend that the decentralization of tax and spending decisions introduces competition among governmental units seeking to attract citizens and other mobile resources and thereby constrains taxing power oates analyzed two data sets one pertaining to the state and local sector in the united states and the other consisting of a sample of 43 countries and found little empirical support for the decentralization hypothesis the purpose of this paper is to reconsider his analysis in the case of state and local governments specifically it will be argued that oates s measures of decentralization may be inappropriate to test the hypothesis furthermore by taking into account the structure or composition of local governmental jurisdictions within a state empirical support of the decentralization hypothesis can be marshaled for general purpose local governments such as counties and municipalities i measuring fiscal decentralization among the states

semiparametric estimation of the binary choice model for contingent valuation this paper is concerned with the estimation of the binary choice model without imposing any parametric structure on the distribution of the stochastic term we adapt the distribution free maximum l

an empirical analysis of state and local tax structure in the context of the leviathan model of government this paper has investigated the ability of an extreme and relatively simple model of political behavior to explain the level of revenues generated by state and local governments in general the behavior of these governments appears to be at least consistent with many of the fiscal outcomes predicted by the leviathan theory several although not all of the specific leviathan theory hypotheses considered received empirical support the evidence was consistent with the hypothesis that states utilizing comprehensive tax bases especially a personal income tax can be expected to generate higher levels of aggregate revenues strong support was also observed for the contention that intergovernmental competition by general purpose substate governments may serve as a substitute for constitutional constraints in limiting the revenue generating power of local governments

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

fundamental economic factors that affect housing prices comparative analysis between kosovo and slovenia the purpose of this study is to provide strategic implications for real estate appraisers and real estate managers to know the economic determinants of housing price dynamics in kosovo the fundamental economic determinants of housing prices adopted from previous studies are gross domestic product growth demographics real interest rates and construction costs the research methodology used is quantitative factor analysis the main question addressed is whether the conventional fundamental determinants of housing prices such as gross domestic product per capita real interest rates demographic factors and construction costs have driven the observed housing prices in kosovo by sampling the determinants of housing prices in kosovo the study shows their effects on housing price dynamics the study shows that housing prices in kosovo are significantly determined by the underlying conventional fundamentals this is the first research that tries to determine whether the fundamental economic factors influence the housing prices in kosovo

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

lump sum taxation and the superneutrality and optimum quantity of money in life cycle growth models abstract the question of superneutrality and the optimum quantity of money is addressed in a model where money services enter the utility function and where individuals have finite lives it is demonstrated that the existing result in the literature regarding a positive relationship between money creation and the steady state capital intensity and welfare is not due to monetary policy per se on the contrary this is shown to arise because of the intergenerational wealth effects embedded in the manner in which money is created assuming that preferences are separable between consumption goods and real balances and that the consumption goods are normal it is proved that i money is superneutral and ii any other money supply rule is pareto inferior to the chicago rule provided that the government also embarks on a policy of wealth redistribution across generations through the imposition of appropriate lump sum taxes and transfers

fiscal illusion and the grantor government empirical studies indicate that unconditional intergovernmental grants have a flypaper effect several authors have modeled recipient government spending under fiscal illusion to explain this phenomenon in short grants reduce the perceived marginal cost of recipient government output this paper develops a more general model of illusion that incorporates the grantor government thereby eliminating inconsistencies encountered in previous models the more general model implies that grant finance increases the perceived marginal cost of grantor government output thus grant induced illusion should have two effects an increase in recipient output and a decrease in grantor output the empirical work supports this hypothesis

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

semi parametric discrete choice measures of willingness to pay abstract a semi parametric discrete choice method is proposed to recover welfare measures from individual choice data the proposed method is compared with the traditional binary choice models in an application to measure benefits of recreation trips

modeling recreation demand within a random utility framework abstract this paper develops a single site single trip random utility model for describing recreation behavior the model is applied to a 1981 survey of households in the pennsylvania monongahela river basin hicksian benefit estimates derived from it are compared with those from a more conventional travel cost model estimated from the same survey

analysing disequilibrium interest rate systems in developing countries abstract under equilibrium conditions monetary policy measures to raise institutional interest rates are contractionary when interest rates are held below their free market equilibrium levels however an increase can be expansionary higher institutional interest rates may deter savings in the form of unproductive inflation hedges and encourage savings in the form of financial claims issued to finance productive investment in most developing countries money is the predominant financial repository of savings and bank loans are a major source of investible funds hence attention is focused here on models which analyse the effects of binding interest rate ceilings on financial intermediation empirical evidence reported in this paper is consistent with the view that binding institutional interest rate ceilings can have a substantial growth reducing impact

federalism and the size of government over the last few decades the size of the public sector in both absolute and relative terms has increased in all of the western economies this has led to considerable investigation of the factors determining government size factors considered have included income elasticity of voter demand for public goods i e wagner s law relative price changes threshold effects e g wars or depressions interest group demands e g public sector employees or unions 17 productivity differentials 1 and redistributional motivations 18 10 one factor which has received little more than passing interest is government structure that is centralization of government activities as opposed to decentralization or federalism authors such as fratianni and spinelli 7 musgrave and musgrave 12 beck 2 and buchanan 4 make no mention of government structure as a factor in the determination of government size when considered the impact of government structure on government size is treated more as an afterthought for example mueller and murrell 11 incorporate a centralization variable in only two of their twenty two regression equations and then only in their two stage least squares equations and offer little analysis of its expected impact on government size exceptions to this standard treatment of federalism include brennan and buchanan 3 oates 15 nelson 13 14 and marlow 9 brennan and buchanan consider the structure of government and its impact on public sector size in the context of a revenue maximizing government model they argue that with mobile voters and local public goods decentralization of government taxing and expenditure powers would serve to constrain the size of the public sector in a tiebout like world any attempt on the part of one jurisdiction to exploit its citizenry would result in instantaneous and complete migration on the part of the citizenry to an alternative nonexploitive jurisdiction this competition among jurisdictions for the patronage of the citizenry limits the extent of fiscal exploitation possible and as such the size of the public sector brennan and buchanan note however that w ithin a constitutionally designed federal structure one would predict that there would be constant pressures by competitive lower level governments to secure institutional rearrangements that would moderate competitive pressures 3 182 these institutional rearrangements would take the form of collusive agreements between the central and lower level governments which assign to the central government what were previously lower level revenue raising powers subject to the revenues being returned to the lower level governments by

fiscal decentralization and government size an extension this paper analyzes one method governments employ to circumvent the discipline of a competitive system of fiscal federalism intergovernmental collusion in the form of intergovernmental grants grants it is argued serve to encourage the expansion of the public sector by concentrating taxing powers in the hands of the central government and by weakening the fiscal discipline imposed on governments forced to self finance their expenditures the results reported suggest that intergovernmental grants do encourage growth in the public sector the results offer further support for the use of monopoly government assumptions in public sector modeling

a semiparametric distribution for willingness to pay and statistical inference with dichotomous choice contingent valuation data this paper proposes a semiparametric willingness to pay distribution and discusses several aspects of statistical inference with dichotomous choice contingent valuation data we study likelihood based estimation of the model parameters with and without controlling for unobserved heterogeneity estimation of the mean and median willingness to pay and specification tests these statistical procedures are implemented using a data set in this application we find that a parametric model is rejected in favor of our semiparametric model that the heterogeneity can be adequately controlled using a simple density and that the semiparametric model offers more robust mean willingness to pay estimates

do intergovernmental grants create ratchets in state and local taxes a large literature on the flypaper effect examines how federal grants to states at time period t affect state spending or taxes at time period t we explore the fundamentally different question of how federal grants at time period t affect state tax policy in the future federal grants often result in states creating new programs and hiring new employees and when the federal funding is discontinued these new state programs must either be discontinued or financed through increases in state own source taxes government programs tend to be difficult to cut as goes milton friedman s famous quote about nothing being as permanent as a temporary government program suggesting that it is likely that temporary federal grants create permanent future ratchets in state taxes far from being purely an academic question this argument is why south carolina s governor mark sanford attempted to turn down federal stimulus monies for his state we examine both the impact of federal grants on future state budgets and how federal and state grants affect future local government budgets our findings confirm that grants indeed result in future state and local tax increases of roughly 40 cents for every dollar in grant money received in prior years

searching for leviathan an empirical study in several papers and a recent book geoffrey brennan and james buchanan 1977 1978 1980 have put forth a striking and controversial view of the public sector drawing by analogy on the conventional theory of monopoly in the private sector they envision a monolithic government that systematically seeks to exploit its citizenry through the maximization of the tax revenues that it extracts from the economy from this perspective they develop a fiscal constitution whose central purpose is to constrain leviathan by limiting in various ways its access to tax and other fiscal instruments while the leviathan hypothesis has been the source of lively debate and a wide range of policy proposals it has not been the subject of much systematic empirical work or testing this is a matter of some importance since the policy implications of the leviathan view are disturbing to put it mildly in particular brennan and buchanan virtually stand on their heads many of the basic theorems in public finance for an efficient and equitable tax system if in fact the leviathan view is an inaccurate depiction of the functioning of the public sector the introduction of their policy proposals is likely to make a sorry mess of the fiscal system the leviathan model does however have some straightforward implications for observable fiscal behavior it is the purpose of this paper to examine one of these testable implications brennan and buchanan stress that fiscal decentralization is itself a powerful constraint on leviathan competition among governments in the context of the interjurisdictional mobility of persons in pursuit of fiscal gains can offer partial or possibly complete substitutes for explicit fiscal constraints on the taxing power 1980 p 184 such competition among governments in a federal system that places heavy reliance on local fiscal decisions will greatly limit the capacity of leviathan to channel resources into the public sector in short as indicated by the epigraph to this paper the leviathan model implies that other things equal the size of the public sector should vary inversely with the extent of fiscal decentralization 2