nep-pbe New Economics Papers
on Public Economics
Issue of 2008‒08‒06
fourteen papers chosen by
Oliver Budzinski
Philipps-University of Marburg

  1. Contributing or Free-Riding? A Theory of Endogenous Lobby Formation By Hideo Konishi; Taiji Furusawa
  2. Natural Resource Endowments, Governance, and the Domestic RevenueEffort: Evidence from a Panel of Countries By Fabian Bornhorst; Sanjeev Gupta; John Thornton
  3. Public-private partnerships, cooperative agreements, and the production of public services in small and rural municipalities By Robert D. Mohr; Steven Deller; John Halstead
  4. An experimental inquiry into the effect of yardstick competition on corruption: By Viceisza, Angelino
  5. The Effect of Perfect Monitoring of Matched Income on Sales Tax Compliance: An Experimental Investigation By Cathleen Johnson; David Masclet; Claude Montmarquette
  6. The Causal Relationship Between Government Revenue and Expenditure in Namibia By Eita, Joel Hinaunye; Mbazima, Daisy
  7. Does Government Regulation Complement Existing Community Efforts to Support Cooperation? Evidence from Field Experiments in Colombia By Maria Claudia Lopez; James J. Murphy; John M Spraggon; John K. Stranlund
  8. Peer effects in public contributions: theory and experimental evidence By Coralio Ballester; Pablo Brañas-Garza; María Paz Espinosa
  9. The Problem of Maintaining Compliance within Stable Coalitions: Experimental Evidence By David M. McEvoy; James J. Murphy; John M. Spraggon; John K. Stranlund
  10. TAX POLICY AND SOCIAL OUTPUT: THE U.E. CASE By Talpos, Ioan; Dima, Bogdan; Mutascu, Mihai; Enache, Cosmin
  11. Towards a Fiscal Illusion Index By Mourão, Paulo
  12. Multiple Membership and Federal Sructures By Alexei Savvateev; Michel Le Breton; Valery Makarov; Shlomo Weber
  13. Decentralization, pro-poor land policies, and democratic governance: By Meinzen-Dick, Ruth; Gregorio, Monica Di; Dohrn, Stephan
  14. A model of public and private partnership through concession contracts By Pasquale L. Scandizzo; Marco Ventura

  1. By: Hideo Konishi (Boston College); Taiji Furusawa (Hitotsubashi University)
    Abstract: We consider a two-stage public goods provision game: In the first stage, players simultaneously decide if they will join a contribution group or not. In the second stage, players in the contribution group simultaneously offer contribution schemes in order to influence the government’s choice on the level of provision of public goods. Using perfectly coalition-proof Nash equilibrium (Bernheim, Peleg and Whinston, 1987 JET), we show that the set of equilibrium outcomes is equivalent to an "intuitive" hybrid solution concept, the free-riding-proof core, which is always nonempty but does not necessarily achieve global efficiency. It is not necessarily true that an equilibrium lobby group is formed by the players with highest willingness-to-pay, nor is it a consecutive group with respect to their willingnesses-to-pay. We also show that the equilibrium level of public goods provision shrinks to zero as the economy is replicated.
    Keywords: Common Agency, Public Good, Free Rider, Core, Lobby, Coalition Formation, Coalition-proof Nash Equilibrium
    JEL: C71 C72 F13 H41
    Date: 2008–03
  2. By: Fabian Bornhorst; Sanjeev Gupta; John Thornton
    Abstract: The recent development literature stresses that countries that receive large revenues from natural resource endowments typically raise less revenue from domestic taxation, and that this creates governance problems because the lower domestic tax effort reduces the incentive for the public scrutiny of government. Our results from a panel of 30 hydrocarbon producing countries indicate that the offset between hydrocarbon revenues and revenues from other domestic sources is about 20 percent but that it is invariant to governance indicators.
    Keywords: Hydrocarbons , Revenues , Oil revenues , Taxation , Governance , Corruption ,
    Date: 2008–07–10
  3. By: Robert D. Mohr; Steven Deller; John Halstead
    Abstract: Using data from approximately 1,000 small and mostly rural municipalities from Illinois, New Hampshire, and Wisconsin, the authors study choices in production arrangements over a wide range of services, and examine a variety of contracting options available to local governments. The data reveal that municipalities often rely on contracts to provide an extensive list of services. ; The use of for-profit contractors and cooperative agreements with other governments correlates negatively with population. Nonetheless, small municipalities are less likely to use competitive bidding processes, compare costs between production options, and report that privatization produces savings. Other factors, such as median income, rural geography, and ideology, show statistically significant associations with contracting choices. ; Respondents generally consider themselves "satisfied" with services provided by contract, although satisfaction levels are lower than those associated with self-provision. Satisfaction with services provided by other governments is lower than satisfaction with services provided by private contractors. This suggests that small municipalities encounter no tradeoff in service quality directly attributable to for-profit contractors.
    Keywords: Local government ; Rural areas
    Date: 2008
  4. By: Viceisza, Angelino
    Abstract: "This study reports theory-testing laboratory experiments on the effect of yardstick competition on corruption. The results reveal that on the incumbent's side, yardstick competition acts as a corruption-taming mechanism only if the incumbent politician is female. On the voter's side, voters focus on the difference between the tax rate in their own jurisdiction versus that in another jurisdiction. If the voters' tax rate is deemed unfair compared to that in the other jurisdiction, voters are less likely to re-elect. These findings support the claim by Besley and Case (1995) that incumbent behavior and tax setting are tied together through the nexus of yardstick competition, suggesting that our laboratory experiments have some external validity." from Author's Abstract
    Keywords: Corruption, Yardstick competition, Political agency, Asymmetric and private information, Experiments, Social protection, Institutions,
    Date: 2008
  5. By: Cathleen Johnson; David Masclet; Claude Montmarquette
    Abstract: Noncompliance is a quantitatively important phenomenon that affects significantly revenue source for state governments. This phenomenon raises challenging questions about the determinants of tax reporting and also about the appropriate design of a tax system: how many resources should be devoted to auditing? This paper provides specific empirical insights using an experimental approach to measure the effects of systematic sales tax monitoring and the determinants of sales tax compliance. The results indicate that if perfect monitoring is instituted without other complementary policies, an increase in tax revenues is not the likely outcome. A successful policy aiming at reducing fiscal fraud might be a difficult task, once people have decided their equilibrium level of tax compliance. The reference-dependent effect observed in the data suggests that individuals will try to recover their losses following any policy changes even if it means taking more risks. <P>Les revenus de plusieurs niveaux de gouvernements sont significativement altérés par la fraude fiscale. Découvrir les déterminants de la fraude fiscale est un défi important alors que ce phénomène pose en même temps la question du design du système de taxation. Combien de ressources devons-nous, par exemple, consacrer à l’audit? Cette recherche mobilisant l’économie expérimentale offre une analyse empirique sur les effets d’assurer systématiquement le contrôle de la taxe de vente et d’étudier les déterminants de s’acquitter du paiement de ce type de taxes. Les résultats indiquent que le contrôle parfait de la taxe de vente sans politiques complémentaires n’augmentent pas nécessairement les rentrées fiscales. Une politique efficace pour réduire la fraude fiscale s’avère une tâche difficile si les agents impliqués ont décidé d’un niveau d’équilibre de conformité dans le paiement de leurs taxes. Les données montrent que les participants tendent à recouvrer leurs pertes suite à un changement de politique fiscale même s’ils doivent prendre plus de risques pour y arriver.
    Keywords: sales tax, perfect monitoring, experimental economics, reference-dependent effect., taxe de vente, fraude fiscale, économie expérimentale, politiques d’audit.
    Date: 2008–07–01
  6. By: Eita, Joel Hinaunye; Mbazima, Daisy
    Abstract: The relationship between government revenue and government expenditure is important, given its relevance for policy especially with respect to the budget deficit. The purpose of this paper is to investigate the relationship between government revenue and government expenditure in Namibia. It investigates the causal relationship between government revenue and government expenditure using Granger causality test through cointegrated vector autoregression (VAR) methods for the period the period 1977 to 2007. The paper tests whether government revenue causes government expenditure or whether the causality runs from government expenditure to government revenue, and if there is bi-directional causality. The results show that there is unidirectional causality from government revenue to government expenditure. This suggests unsustainable fiscal imbalances (deficit) can be mitigated by policies that stimulate government revenue.
    Keywords: government expenditure; government revenue; causality; cointegration test; revenue-spend; spend-revenue; fiscal synchronisation; Namibia
    JEL: C32 C5 H0 C50 H5 H2
    Date: 2008–05–26
  7. By: Maria Claudia Lopez (Workshop in Political Theory and Policy Analysis, Indiana University, Bloomington, IN); James J. Murphy (Department of Economics, University of Alaska Anchorage, Anchorage, AK); John M Spraggon (Department of Resource Economics, University of Massachusetts Amherst); John K. Stranlund (Department of Resource Economics, University of Massachusetts Amherst)
    Abstract: In this paper we describe a field experiment conducted among mollusk harvesters in a community on the Pacific Coast of Columbia. The experiment is based on a standard linear public good and consists of two stages. In the first stage we compare the ability of monetary and nonmonetary sanctions among community members to increase contributions to the public good. In the second stage we add a government regulation with either a high or low sanction for noncompliance to community enforcement efforts. The results for the first stage are consistent with other comparisons of monetary and nonmonetary sanctions within groups; both led to higher contributions. The results from the second stage reveal that government regulations always complemented community enforcement efforts. While the subjects tended to reduce their sanctioning efforts under the government regulations, contributions and earnings were significantly higher than without government interventions. In fact, the combination of community and government enforcement efforts generated near-perfect contributions to the public good. However, more research into the combined roles of government intervention and community enforcement efforts is needed because the complementarity we find may be situation-specific.
    Keywords: Field experiments, public goods, government regulation, community enforcement
    JEL: C93 H41 Q2
    Date: 2008–07
  8. By: Coralio Ballester (Department of Economics, University of Alicante.); Pablo Brañas-Garza (Department of Economic Theory and Economic History, University of Granada.); María Paz Espinosa (Universidad del País Vasco)
    Abstract: This paper analyzes the impact of social integration on cooperative behavior. We show that if the social network shows assortative mixing then conditional cooperation is an equilibrium strategy for altruistic subjects with a high degree of social integration.We provide experimental evidence on the relationship between individuals’ position in a social network and their contributions in a public good game.
    Keywords: public good game, social networks, conditional cooperation.
    JEL: C91 D64 C72 H41
    Date: 2008–06–27
  9. By: David M. McEvoy (Department of Economics, Appalachian State University, Boone, NC); James J. Murphy (Department of Economics, University of Alaska Anchorage, Anchorage, AK); John M. Spraggon (Department of Resource Economics, University of Massachusetts Amherst); John K. Stranlund (Department of Resource Economics, University of Massachusetts Amherst)
    Abstract: This study examines the performance of stable cooperative coalitions that form to provide a public good when coalition members have the opportunity to not comply with their commitments. A stable coalition is one in which no member wishes to leave and no non-member wishes to join. To counteract the incentive to violate their commitments, coalition members fund a third-party enforcer. This leads to the theoretical conclusion that stable coalitions are larger (and provide more of a public good) when their members must finance enforcement relative to when compliance is ensured without the need for costly enforcement. However, our experiments reveal that giving coalition members the opportunity to violate their commitments while requiring them to finance enforcement to maintain compliance reduces the overall provision of the public good. The decrease in the provision of the public good is attributed to an increase in the participation threshold for a theoretically stable coalition to form and to significant levels of noncompliance. When we abandon the strict stability conditions and require all subjects to join a coalition for it to form, the average provision of the public good increases significantly.
    Keywords: stable coalitions, self-enforcing agreements, compliance, enforcement, public goods
    JEL: H41 C92
    Date: 2008–07
  10. By: Talpos, Ioan; Dima, Bogdan; Mutascu, Mihai; Enache, Cosmin
    Abstract: The aim of this paper is to emphasize how the correlations between fiscal policy and economic growth are manifesting in the U.E. case. After theoretical framework, the paper is organized as follows: Section 2 tries to provide a model at micro economic level for the interconnections between fiscal policy and economic growth and Section 3 looks for same empirical evidences for the EU 25 case. Finally, some conclusions are drawn and some limits of the proposed analysis are derived in Section 4.
    Keywords: fiscal policy; economic growth; effects; European Union
    JEL: H11 H30 I00
    Date: 2008–05
  11. By: Mourão, Paulo
    Abstract: This paper presents an index of Fiscal Illusion for 68 democratic countries from 1960 to 2006. The studied Fiscal Illusion is the one related to a wrong perception of the budget aggregates according to the voters and taxpayers’ perspectives. In the construction of the index, methodological issues were carefully taken into account. The results obtained reveal that fiscal illusion varies greatly around the world. Countries such as Mali, Pakistan, Russia and Sri Lanka have the highest average values over the time period considered; while Austria, Luxembourg, Netherlands and New Zealand have the lowest. Regarding the time dimension, between 1980 and 1995 there was a significant decrease in the average value of the index across countries, suggesting a reduction in the adoption of fiscal illusion measures during this period. After 1995, the index remained stable in most of the countries.
    Keywords: Fiscal Illusion; Indexes/Indicators; Democracy
    JEL: E62 H11 C82 H30
    Date: 2007–11
  12. By: Alexei Savvateev (New Economic School); Michel Le Breton (Universitè de Toulouse I, GREMAQ and IDEI); Valery Makarov (Central Economics and Mathematics Institute and New Economic School); Shlomo Weber (Southern Methodist University and CEPR)
    Abstract: We consider a model of the “world" with several regions that may create a unified entity or be partitioned into several unions (countries). The regions have distinct preferences over policies chosen in the country to which they belong and equally share the cost of public policies. It is known that stable \political maps" or country partitions, that do not admit a threat of secession by any group of regions, may fail to exist. To rectify this problem, in line with the recent trend for an increased autonomy and various regional arrangements, we consider federal structures, where a region can simultaneously be a part of several unions. We show that, under very general conditions, there always exists a stable federal structure.
    Keywords: Partitions, Federal Structures, Stability, Cooperative Games
    JEL: C71 D71 H41
    Date: 2008–05
  13. By: Meinzen-Dick, Ruth; Gregorio, Monica Di; Dohrn, Stephan
    Abstract: "Decentralized approaches to development are gaining increasing prominence. Land tenure reform policy has been affected by many different types of decentralization. However, the literature on land tenure reform rarely explicitly addressed the implications of decentralization, and vice versa. This paper provides a review of how the issues of decentralization are linked to land tenure reform, in theory and practice. Both decentralization and land tenure reform each encompass a number of different, but related concepts and approaches. We begin with clarifying some key terms related to these different approaches, then look in more detail at contending perspectives on decentralization, and how these relate to the United Nations Development Programme's (UNDP) pillars of democratic governance. We then review the different types of land tenure reform in terms of the role of centralized and decentralized institutions, illustrating the strengths and weaknesses, gaps and challenges with experience from a range of developing countries. The final section turns to conclusions and policy recommendations, considering how decentralized approaches to land tenure reform can contribute to goals such as gender equity, social cohesion, human rights, and the identity of indigenous peoples." authors' abstract
    Keywords: Decentralization, Land, Tenure reform, Democratic governance, Rights, Registration, Redistribution, Restitution, Recognition, Devolution,
    Date: 2008
  14. By: Pasquale L. Scandizzo (University of Rome Tor Vergata); Marco Ventura (ISAE - Institute for Studies and Economic Analyses)
    Abstract: In this paper, we investigate the economics of concession under dynamic uncertainty using real option theory. We analyze the properties of concession as an instrument to privatize investment and management of public resources. In this context, we explore, in particular, three issues: (1) the conditions under which the contract is acceptable to both a public and a private party, (2) the conditions under which it is efficient, i.e. it is preferable to direct development and operation by the public sector, and (3) two different possible equilibrium solutions. Finally, we apply the theoretical results obtained to the case of a major public highway concessionaire in Italy.
    Keywords: concession contract, real option, license, Autostrade per l’Italia, private and public partnership
    JEL: D45 H44 H54
    Date: 2008–07

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