nep-pbe New Economics Papers
on Public Economics
Issue of 2009‒07‒11
thirteen papers chosen by
Oliver Budzinski
Philipps-University of Marburg

  1. The performance of local government in the execution of public works By Guccio, Calogero; Pignataro, Giacomo; Rizzo, Ilde
  2. Tax reform, delocation and heterogeneous firms By Baldwin, Richard; Okubo, Toshihiro
  3. Government Decentralization as a Disincentive for Transnational Terror? An Empirical Analysis By Dreher, Axel; Fischer, Justina A.V.
  4. Public- and private-good values of statistical lives Results from a combined choice-experiment and contingent-valuation survey By Strand, Jon
  5. Public-good valuation and intrafamily allocation By Strand, Jon
  6. The regional public spending for tourism in Italy: An empirical analysis By Cellini, Roberto; Torrisi, Gianpiero
  7. Secret Santa: Anonymity, Signaling, and Conditional Cooperation By David Hugh-Jones; David Reinstein
  8. Reducing Corruption in Public Education Programs in Africa:Instruments and Capture in Madagascar By Nathalie Francken
  9. Governance matters VIII : aggregate and individual governance indicators 1996-2008 By Kaufmann, Daniel; Kraay, Aart; Mastruzzi, Massimo
  10. Does Labor Supply Respond to a Flat Tax? Evidence from the Russian Tax Reform By Duncan, Denvil; Sabirianova Peter, Klara
  11. Valuing Public Goods Using Happiness Data: The Case of Air Quality By Arik Levinson
  12. Taxation and Entrepreneurship in a Welfare State By Stenkula, Mikael
  13. Regional federalisation with a cosmopolitan intent By Kjartan Koch Mikalsen

  1. By: Guccio, Calogero; Pignataro, Giacomo; Rizzo, Ilde
    Abstract: This paper aims at analysing the procurement of public works paying attention to the level of government involved. Such an issue has not received so far attention in the literature on fiscal federalism nor in the public works procurement literature. We focus the attention upon the execution stage of public works: indeed, their efficient provision and their capability to deliver the planned benefits are severely affected by the problems arising at the execution stage because of the incompleteness of the underlying contract. The main result is that local governments seem to be less efficient in the management of the execution process, suffering from longer delays than central government. This phenomenon is more severe for small municipalities and when the contract is mainly financed with external resources.
    Keywords: public procurement; local government; soft budget
    JEL: H57 H77 H72
    Date: 2009–06
  2. By: Baldwin, Richard; Okubo, Toshihiro
    Abstract: The standard international tax model is extended to allow for heterogeneous firms when agglomeration forces are important thus allowing us to study the relocation effects of taxes that vary according to firm size. We show that allowing for heterogeneity permits a given tax scheme to have an endogenously different effect on the location decision of small and big firms, with the biggest firms being endogenously more likely to relocate in reaction to high taxes. We show that a reform which flattens the tax-firm-size profile can raise tax revenue without inducing any relocation.
    Keywords: agglomeration forces; International tax competition; Zimmerman hypothesis
    JEL: H32 P16
    Date: 2009–06
  3. By: Dreher, Axel (University of Göttingen); Fischer, Justina A.V. (University of Hohenheim)
    Abstract: Using panel data for a maximum of 109 countries over the years 1976-2000, we empirically analyze the impact of decentralization on the occurrence of transnational terror. Our results show that expenditure decentralization reduces the number of transnational terror events in a country, while political decentralization has no impact. These results are robust to the choice of control variables and method of estimation.
    Keywords: terrorism, decentralization, federalism, governance quality, government effectiveness
    JEL: D74 H70 H40
    Date: 2009–06
  4. By: Strand, Jon (Department of Economics)
    Abstract: We present a stated-preference study where values of statistical lives (VSL) are derived both as public and private goods, and we distinguish between three different death causes, heart disease, environmentally related illnesses and traffic accidents. 1000 randomly chosen individuals in Norway were faced a three-part valuation procedure: 1) pairwise comparisons (conjoint analysis), 2) combined contingent-ranking and contingent-valuation of willingness to pay (WTP) for public projects to reduce overall population mortality risk, and 3) WTP for individual treatment reducing own mortality risk from heart disease. Parts 1-2 comprise all three death causes, and indicate public-good VSL in the range 3-6 million USD, with heart disease deaths in the lower part of this range, environmental causes in the upper part, and traffic accidents in-between. Part 2 also permits a splitting up of VSL into motives (selfmotivated and altruistic), and indicates that about 30 % of total public-good WTP is selfmotivated. Part 3 provides a self-motivated (private-good) VSL figure for heart disease in the range 1-1.5 million USD, close to the self-motivated share of VSL from part 2. We find high consistency between values derived, and indications that private- and public-good VSL may differ subtantially, as well as VSL by death cause. Under pairwise comparisons in part 1 we find complete insensitivity of VSL to risk magnitude (or “scope”), in contrast to existing literature. The more complex choices under part 2 by contrast imply considerable scope sensitivity.
    Keywords: Value of statistical lives; public goods; stated preference methods; altruism
    JEL: D64 H41 H42 I18
    Date: 2009–06–29
  5. By: Strand, Jon (Department of Economics)
    Abstract: I derive the value of marginal changes in a public good for two-person households, measured alternatively by household member i’s willingness to pay (WTP) for the good on behalf of the household, WTPi(H), or by the sum of individual WTP values across family members, WTP(C). Households are assumed to allocate their resources in efficient Nash bargains over one private good for each member, and one common household good. WTPi(H) is then found by trading off the public good against the household good, and WTP(C) by trading the public good off against the private goods. I show that WTPi(H) is on average a correct representation of WTP(C), but is higher (lower) than this average when member 1 has a higher (lower) marginal public good value than member 2. Pure and paternalistic altruism (the latter attached to consumption of the public good) both move each member’s WTP on behalf of the household closer to the true aggregate WTP, while only the latter raises aggregate WTP. The results have important implications for interpretation of results from contingent valuation surveys of public-goods. In a large sample, individuals tend to represent households correctly on average when asked about household WTP, and counting all members’ WTP answers on behalf of the household will lead to double counting.
    Keywords: Public goods; willingness to pay; contingent valuation; intrafamily allocation; Nash bargaining
    JEL: D13 D64 H41 Q26
    Date: 2009–06–22
  6. By: Cellini, Roberto; Torrisi, Gianpiero
    Abstract: We analyse the effects of public spending for tourism, in Italian regions. The evaluation is permitted by the availability of the databank under the project “Conti Pubblici Territoriali” (“Regional Public Account”) of the Ministry of Economic Development: the spending of all public subjects is aggregated according to the regions of destinations, and classified according to different criteria, including the sectoral criterion. We take a cross-section regression analysis approach. The effects of public spending for tourism on tourism attraction are investigated. Generally speaking, the effectiveness of public spending appears to be really weak.
    Keywords: Tourism; Regions; Public Spending; Regional Public Account.
    JEL: R53 R58 L83 C21
    Date: 2009–07–07
  7. By: David Hugh-Jones (Max Planck Institute for Economics, Jena); David Reinstein (Department of Economics, Essex University)
    Abstract: Costly signaling of commitment to a group has been proposed as an explanation for participation in religion and ritual. But if the signal's cost is too small, freeriders will send the signal and behave selflshly later. Effective signaling may then be prohibitively costly. If the average level of signaling in a group is observable, but individual effort is not, then freeriders can behave selflshly without being detected, and group members will learn about the average level of commitment among the group. We develop a formal model, and give examples of institutions that enable anonymous signaling, including ritual, religion, music and dance, voting, charitable donations, and military institutions. We explore the value of anonymity in the laboratory with a repeated two-stage public goods game with exclusion. When first-stage contributions are anonymous, subjects are better at predicting second-stage behavior, and maintain a substantially higher level of cooperation.
    Keywords: signaling, anonymity, public goods
    JEL: H41
    Date: 2009–07–02
  8. By: Nathalie Francken
    Abstract: This paper investigates how the choice of public expenditure instrument is affecting capture in the public education sector. We analyze data on two public funding schemes in Madagascar. We find that there is much more capture of in-kind transfers than of cash transfers. Capture of both instruments declines with better local access to media information and with higher local literacy rates. However, capture of cash grants falls rapidly with a raise in the level of education of the intended beneficiaries, while this effect is significantly weaker for capture of in-kind funds. Our findings suggest that intensive monitoring and increased public access to information should be combined with the right instrument for public funding implementation in order to eradicate capture and corruption.
    Keywords: Public Expenditures; Transparency; Media
    JEL: H52 I22
    Date: 2009
  9. By: Kaufmann, Daniel; Kraay, Aart; Mastruzzi, Massimo
    Abstract: This paper reports on the 2009 update of the Worldwide Governance Indicators (WGI) research project, covering 212 countries and territories and measuring six dimensions of governance between 1996 and 2008: Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. These aggregate indicators are based on hundreds of specific and disaggregated individual variables measuring various dimensions of governance, taken from 35 data sources provided by 33 different organizations. The data reflect the views on governance of public sector, private sector and NGO experts, as well as thousands of citizen and firm survey respondents worldwide. The authors also explicitly report the margins of error accompanying each country estimate. These reflect the inherent difficulties in measuring governance using any kind of data. They find that even after taking margins of error into account, the WGI permit meaningful cross-country comparisons as well as monitoring progress over time. The aggregate indicators, together with the disaggregated underlying indicators, are available at
    Keywords: Governance Indicators,National Governance,Public Sector Corruption&Anticorruption Measures,Economic Policy, Institutions and Governance,Banks&Banking Reform
    Date: 2009–06–01
  10. By: Duncan, Denvil (Georgia State University); Sabirianova Peter, Klara (Georgia State University)
    Abstract: We exploit the exogenous change in marginal tax rates created by the Russian flat tax reform of 2001 to identify the effect of taxes on labor supply of males and females. We apply the weighted difference-in-difference regression approach and instrumental variables to the labor supply function estimated on individual panel data. The mean regression results indicate that the tax reform led to a statistically significant increase in male hours of work but had no effect on that of females. However, we find a positive response to tax changes at both tails of the female hour distribution. We also find that the reform increased the probability of finding a job among both males and females. Despite significant variation in individual responses, the aggregate labor supply elasticities are trivial and suggest that reform-induced changes in labor supply were an unlikely explanation for the amplified personal income tax revenues that followed the reform.
    Keywords: labor supply, personal income tax, flat tax, labor supply elasticity, difference-in-difference, regression discontinuity, wage endogeneity, employment participation, Russia, transition
    JEL: H3 J2 J3 P2
    Date: 2009–06
  11. By: Arik Levinson
    Abstract: This paper describes and implements a method for estimating the average marginal value of a time-varying local public good: air quality. It uses the General Social Survey (GSS), which asks thousands of people in various U.S. locations how happy they are, along with other demographic and attitude questions. These data are matched with the Environmental Protection Agency's Air Quality System (AQS) to find the level of pollution in those locations on the dates the survey questions were asked. People with higher incomes in any given year and location report higher levels of happiness, and people interviewed on days when air pollution was worse than the local seasonal average report lower levels of happiness. Combining these two concepts, I derive the average marginal rate of substitution between income and air quality – a compensating variation for air pollution.
    JEL: H41 Q51 Q53
    Date: 2009–07
  12. By: Stenkula, Mikael (Research Institute of Industrial Economics (IFN))
    Abstract: Does tax policy affect the rate of self-employment in a modern welfare state? This question is analyzed empirically based on Swedish data for the entire post-war period. Available tax data indicate that payroll taxes have had a negative influence on the unincorporated rate of self-employment, though the effect is modest. No effects from regular labor income taxation or capital gains taxation are found. The paper improves upon earlier studies in that it tries to separate the effects of different taxes, and uses cointegration techniques. A further extension is that it studies a Scandinavian high-tax welfare state. Earlier time-series studies analyzing self-employment and taxation have with few exceptions been based on data from countries with relatively low tax levels and less comprehensive welfare systems, notably the US and the UK.
    Keywords: Entrepreneurship; Self-employment; Taxation; Welfare state
    JEL: H20 J23 L26
    Date: 2009–06–10
  13. By: Kjartan Koch Mikalsen
    Abstract: This paper deals with the issue of institutionalising a legal pacifistic international order. While Kant’s idea of perpetual peace serves as the point of departure, it is argued that in order to find a proper institutional arrangement one would have to look beyond the two notions found in Kant: the voluntary federation and the world state. In line with proponents of the world state, the author argues that the federative model is not only inconsistent with the idea of an international civil condition, but also is inadequate in empirical terms. At the same time, strong reasons can be raised against various world state conceptions. Against David Held’s idea of a ‘cosmopolitan democratic community’ it is argued that a world state could not become a relevant arena for democratic politics due to the lack of a robust civic solidarity at the global level. When it comes to more moderate ideas of world government, such as Otfried Höffe’s ‘minimal world state’, the traditional problem of despotism is held up, although in an untraditional way. Less than being a problem related to size, it is a problem related to the fact that a world state would have no external borders. Furthermore, it is argued that the conceptually necessary connection which often is said to exist between the state and any legal order relies on a misleading comparison of anarchic international relations with the original state of nature, conceived of, not as a hypothetical, but as an empirical condition. In so far as the so-called theorem of an international state of nature does not hold, it is argued, in line with Jürgen Habermas, that a peaceful international law-based order coherently can be envisaged as a non-state multi-level system. However, in order live up to the basic principles of Kant’s (liberal) republicanism, such a multi-levelled world order requires that regional unions like the EU and others, evolve into federal states.
    Keywords: democracy; European law; federalism; globalization; governance; institutions; international regimes; multilevel governance; supranationalism
    Date: 2009–06–15

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