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on Urban and Real Estate Economics |
| By: | Jeff Petchey; Sophia Levtchenkova |
| Abstract: | Fiscal capacity equalisation, at least of the type implemented in Australia, is shown to link regions together through a grant distribution formula that creates an incentive for regions to act strategically in order to influence the size of their grant. This behaviour distorts the provision of local public goods away from optimal levels of provision by changing regional perceptions of the marginal benefit from local public good provision. In addition, the inter-regional transfer of income that occurs with equalisation leads to inefficiency in the spatial allocation of mobile factors of production. As a result, we conclude that equalisation may create economic inefficiency, and lead to a lower level of social welfare. |
| Keywords: | fiscal equalisation, revenue needs, expenditure needs, local public goods, Nash equilibrium, labour mobility, fiscal externalities, economic rents. |
| Date: | 2004–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper0415&r=ure |
| By: | Bob Searle |
| Abstract: | A nation’s fiscal transfer system has many facets. Usually, the central government has several objectives in transferring funds to local government . Individual local governments often have objectives that conflict with the central government and with other one another. This paper looks at the relationships between policies associated with reducing vertical fiscal imbalance and the achievement of horizontal fiscal equalization, often a major national (as opposed to a central government) objective. In considering possible ways of reducing VFI, the paper discusses public sector revenue sharing and, in particular, the revenues raised from natural resources, looking at the policy issues that arise and what the considerations are when deciding how these elements of a fiscal transfer system can be combined to meet governments’ overall objectives. |
| Keywords: | Revenue Sharing, Natural Resources and Fiscal Equalization |
| Date: | 2004–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper0416&r=ure |
| By: | Paul Bernd Spahn |
| Abstract: | The paper categorizes different types of intergovernmental transfers, discusses the funding rule of grants, and outlines some principles for setting up transfer allocation mechanisms that respect hard budget constraints at the macroeconomic level. The mechanics of a neutral transfer scheme aiming at budget equalization is sketched using data for a fictional developing country, Krakozhia, which aims at implementing an incentive compatible methodology for allocating transfers to its provinces. |
| Keywords: | Intergovernmental fiscal relations, transfers, grants, decentralization, equalization |
| Date: | 2004–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper0417&r=ure |
| By: | Ehtisham Ahmad; Leo Martinez |
| Abstract: | This paper argues that both horizontal and intertemporal competition among recipient governments are needed in order to ensure incentives for effective utilization of targeted transfers. This has implications for budgeting frameworks and the types of information needed, that might be amenable to formal contracting between the levels of government. |
| Keywords: | Expenditure Programs, horizontal and intertemporal competition,budgeting |
| Date: | 2004–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper0418&r=ure |
| By: | Roy Bahl (Andrew Young School of Policy Studies, Georgia State University); Sally Wallace (Andrew Young School of Policy Studies, Georgia State University) |
| Abstract: | There are two dimensions to the structure of an intergovernmental transfer: the vertical share and the horizontal share (Bahl and Linn, 19921). The vertical share is the total pool of funds to be allocated to subnational governments, while the horizontal shares are the amounts received by eligible local governments. Most research (and most political attention) is devoted to the latter. The subject of this paper is vertical sharing. We have three goals. The first is a quantitative analysis of trends and cross-country variations in vertical sharing. In particular, we are interested in what explains the vertical share and whether there has been an increase in the importance of intergovernmental fiscal transfers and in the question of what explains the cross-country variations in this importance. The second is a description of the range of the practice in vertical sharing. Finally, we offer some criteria by which the impact of vertical sharing might be evaluated. |
| Keywords: | Intergovernmental Transfers,Vertical Sharing Dimension, subnational government, local government |
| Date: | 2004–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper0419&r=ure |
| By: | Alex B. Brillantes Jr.; Jose Tiu Sonco |
| Abstract: | This paper is divided into nine sections. The first section discusses the context within which intergovernmental transfers occurs. The second section discusses the framework of the paper that tries to look at the bigger picture suggesting that the system of intergovernmental transfers occurs within the policy framework of decentralization in general, and fiscal decentralization in particular. Additionally, the principles of good governance – accountability, predictability, transparency and participation – impact upon the implementation of intergovernmental transfers. For instance, the predictability of transfers to sub-national levels of government enables rational and realistic planning. The third section of the paper discusses the rationale, objectives and outcomes of intergovernmental transfers. It suggests that, at the end of the day, outcomes – operationalized in terms of the delivery of appropriate basic services – have to be “harmonized” with the objectives of the transfers, which are essentially, to provide adequate financial resources to fund the functions that are delivered at sub-national levels. Parts six and seven suggest that both citizen engagement and capacity building may be important components in the design of intergovernmental transfers and contribute to the harmonization of objectives and outcomes. More specifically, these sections point out the objectives of the transfers and the general outcomes. The paper also includes some examples of some countries that suggest that citizen participation and capacity building may contribute to the general objective of harmonizing objectives and outcomes. |
| Keywords: | intergovernmental transfers,decentralization, |
| Date: | 2004–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper0420&r=ure |
| By: | Jameson Boex (Andrew Young School of Policy Studies, Georgia State University); Jorge Martinez-Vazquez (Andrew Young School of Policy Studies, Georgia State University) |
| Abstract: | The design of intergovernmental equalization transfer mechanisms, whether as the result of the introduction of a new transfer scheme or as part of the revision of an existing one, is a key element of local government finance reform around the world. While the basic elements and principles of designing intergovernmental fiscal transfer schemes apply universally across both developed and developing economies, less developed and transition countries (LDTCs) often face the additional challenge of designing their transfer mechanisms in the absence of substantial data on relevant local fiscal, demographic, and socio-economic variables. The absence of the necessary data to adequately quantify local expenditure needs and fiscal capacity in order to allocate formula-based equalization grants in an efficient, equitable and transparent manner forms an additional hurdle in the implementation of a sound system of intergovernmental fiscal relations in many developing and transition economies. |
| Keywords: | Intergovernmental Fiscal Relations,Equalization Transfers |
| Date: | 2004–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper0421&r=ure |
| By: | Dana Weist |
| Abstract: | Governments decentralize for various political and economic reasons. It can be a means to move decision making closer to people, to enhance the efficiency and responsiveness of service delivery, and to make tax systems more productive. In some countries, it may also promote national cohesion (e.g., Indonesia). Done well, decentralization can lead to all of the benefits promised by a multi-tiered intergovernmental system: better public services, enhanced local accountability, and a potential tool for poverty alleviation. But if decentralization is done badly, it can lead to macroeconomic instability, deterioration in service delivery, corruption and collapse of the safety net. |
| Keywords: | Intergovernmental Loans, Transfer System, dezentralization |
| Date: | 2004–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper0422&r=ure |
| By: | Richard M. Bird |
| Abstract: | China is the world’s most populous country. For some years, China has sustained a remarkably fast rate of economic growth. Despite the forests of construction cranes so often noted by visiting foreigners, however, China remains to a surprising extent a rural country, with only about one-third of its population living in urban areas. But China’s cities are growing rapidly, and within a decade half or more of its population will be urban. In addition to urbanizing less rapidly than would normally be expected for its growth rate, the pattern of urban growth in China during its recent rapid economic expansion has also not followed that found in other countries. In particular, contrary to experience in most of the world, its largest urban centers have on the whole grown less rapidly than the urban sector as a whole. Moreover, in some critical respects the internal pattern of growth within Chinese cities has also deviated from what economic logic would suggest is sensible – although in this respect at least its experience is not too different to what has been seen elsewhere. |
| Keywords: | Urban Development, China, Economic Growth |
| Date: | 2004–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper0435&r=ure |
| By: | F. Javier Arze del Granado (Andrew Young School of Policy Studies, Georgia State University); Jorge Martinez-Vazquez (Andrew Young School of Policy Studies, Georgia State University); Robert McNab |
| Abstract: | This study examines the relationship between fiscal decentralization and the functional composition of public expenditures. We develop a theoretical model based on a distance-sensitive representative agent model, some applications of the median-voter theorem, and the Tiebout choice model. In our model, higher levels of fiscal decentralization lead indiviuals to demand higher amounts of publicly provided private goods. We empirically test this hypothesis by employing several econometric models on an unbalanced panel data set of 45, developed and developing countries over a 28-year period. The empirical models used in this study improve upon previous empirical studies of expenditure composition by using up-to-date data and the most current estimation techniques for fractional data. We obtain strong evidence that fiscal decentralization increases the share of education and health expenditures over total expenditures. Most of our estimates reveal no statistically significant evidence that the effects of decentralization may differ between developing and industrialized countries. However, for one model we find evidence that the effect of decentralization on the composition of public expenditures is greater in developing countries than in industrialized countries. |
| Keywords: | Fiscal Decentralization, and Functional Composition of Public Expenditures |
| Date: | 2005–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper0501&r=ure |
| By: | Jorge Martinez-Vazquez (Andrew Young School of Policy Studies, Georgia State University); Andrey Timofeev (Andrew Young School of Policy Studies, Georgia State University) |
| Abstract: | The international experience shows a variety of approaches to the organization and degree of decentralization in tax administration. It is quite common to observe, even in countries that are otherwise significantly decentralized as is the case in the Scandinavian Countries, a highly centralized organization of tax administration. Nevertheless, there are other countries, in small number, where tax administration is highly decentralized; in some cases, as in Germany, even central government taxes are administered by the decentralized subnational governments. The fundamental questions addressed in this paper are the following: what is the most appropriate approach to organizing the vertical structure of tax administration, and what are the determinant factors that may make an approach more or less optimal in any particular country. |
| Keywords: | Centralized and Decentralized Models of Tax Administration |
| Date: | 2005–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper0502&r=ure |
| By: | Jorge Martinez-Vazquez (Andrew Young School of Policy Studies, Georgia State University); Robert McNab |
| Abstract: | This paper examines how fiscal decentralization may influence economic growth. Previous research on this question has primarily focused on the potential direct relationship between decentralization and growth. In this paper, we also examine the potential indirect influence of decentralization on growth through its impact on macroeconomic stability. Using an international panel data set, we find that fiscal decentralization appears to reduce the rate of inflation in the sample countries and it does not appear to directly influence economic growth. Fiscal decentralization, however, appears to have an indirect, positive effect on growth through its positive influence on macroeconomic stability. The indirect effect of fiscal decentralization on economic growth via macroeconomic stability has not been previously identified in the literature. |
| Keywords: | Fiscal Decentralization,Macrostability, and Growth |
| Date: | 2005–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper0506&r=ure |
| By: | Jameson Boex (Andrew Young School of Policy Studies, Georgia State University); Jorge Martinez-Vazquez (Andrew Young School of Policy Studies, Georgia State University) |
| Abstract: | Although the presence of objective formula-based grants is an important component of a stable, equitable and efficient system of intergovernmental fiscal relations, the final incidence of grants is not always according to what is stated in the formula because there are other intervening institutional factors. Furthermore, the intergovernmental grant mechanism itself is often a function of the same interests or forces that ultimately drive the incidence of grant resources. This paper relates the horizontal allocation of intergovernmental grants directly to their potential underlying determinants, including normative policy issues, voter choice arguments and political considerations. An international comparison of empirical incidence studies reveals that besides local expenditure needs and local fiscal capacity, other factors including political influence and a jurisdiction’s size play important and consistent roles in determining the horizontal allocation of per capita intergovernmental grants. |
| Keywords: | Intergovernmental grants, survey of international experience, horizontal allocation of grants |
| Date: | 2005–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper0509&r=ure |
| By: | Stuti Khemani |
| Abstract: | Normative theories of fiscal federalism postulate that intergovernmental transfers should be determined by equity and efficiency considerations, to support local governments in providing differentiated public goods to heterogeneous populations, while ensuring an even distribution of basic services across all regions (Musgrave, 1959, 1983; Oates, 1972; Gramlich, 1977). However, a recent surge of empirical evidence shows that variations in intergovernmental transfers to sub-national jurisdictions within countries cannot be explained by traditional concerns of equity and efficiency alone, and that political variables representing electoral incentives of public agents are additional and significant determinants. |
| Keywords: | Political Economy,Equalization Transfers, determinants |
| Date: | 2004–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ipswps:paper0413&r=ure |
| By: | Blume,Andreas; DeJong,Douglas V.; Maier,Michael (Tilburg University, Center for Economic Research) |
| Abstract: | In common-interest spatial-dispersion games the agents common goal is to choose distinct locations. We experimentally investigate the role of cognition in such games and compare it with the role of cognition in spatial matching games. In our setup cognition matters because agents may be differentially aware of the dispersion opportunities that are created by the history of the game. We ask whether cognitive constraints limit the agents ability to achieve dispersion and, if there is dispersion, whether these constraints affect the mode by which agents achieve dispersion. Our main finding is that strategic interaction magnifies the role of cognitive constraints. Specifically, with cognitive constraints, pairs of agents fail to solve a dispersion problem that poses little or no problem for individual agents playing against themselves. When we remove the cognitive constraints in our design, pairs of agents solve the same problem just as well as individuals do. In addition, we find that when playing against themselves agents do not change the mode by which they solve the dispersion problem when our design removes the cognitive constraints. |
| JEL: | C72 C92 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200558&r=ure |
| By: | Yamauchi, Futoshi |
| Abstract: | "This paper uses recently available South African school census data from 1996 and 2000 to assess variations in educational quality across former population groups of public schools and dynamic changes in post-apartheid South Africa. The author argues that unless the government actively strengthens its support to former Black schools in allocating both budget and personnel, a vicious cycle of poverty and low-quality education will persist. The worry is that children who do not receive a sufficiently high quality of education are less likely to engage in regular employment and are more likely to suffer from low wages, potentially contributing to the long-term poverty trap." from Text |
| Keywords: | quality of education ,race ,apartheid , |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:fcndbr:182&r=ure |
| By: | Yamauchi, Futoshi |
| Abstract: | "This paper empirically identifies social learning and neighborhood effects in schooling investments in a new technology regime. The estimates of learning-investment rule from farm household panel data at the onset of the Green Revolution in India, show that (1) agents learn about schooling returns from income realizations of their neighbors and (2) schooling distribution of the parents' generation in a community has externalities to schooling investments in children that are consistent with social learning. Simulations show that variations in schooling distributions within and across communities generate through social learning substantial variations in child enrollment rate and average household income. The results suggest that imperfect information hinders investment in human capital." Author's Abstract |
| Keywords: | Human capital ,Risk ,Social learning ,School enrollment ,technological changes ,Green Revolution , |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:fcnddp:190&r=ure |
| By: | Grant Hillier; Federico Martellosio |
| Abstract: | The paper provides significant simplifications and extensions of results obtained by Gorsich, Genton, and Strang (J. Multivariate Anal. 80 (2002) 138) on the structure of spatial design matrices. These are the matrices implicitly defined by quadratic forms that arise naturally in modelling intrinsically stationary and isotropic spatial processes. We give concise structural formulae for these matrices, and simple generating functions for them. The generating functions provide formulae for the cumulants of the quadratic forms of interest when the process is Gaussian, second-order stationary and isotropic. We use these to study the statistical properties of the associated quadratic forms, in particular those of the classical variogram estimator, under several assumptions about the actual variogram. |
| Keywords: | Cumulant, Intrinsically Stationary Process, Kronecker |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:cemmap:wp16/04&r=ure |
| By: | Ortalo-Magne, Francois; Rady, Sven |
| Abstract: | Standard explanations for the income heterogeneity within neighborhoods rely on differences of preferences across households and heterogeneity of the housing stock. We propose an alternative and complementary explanation. We construct a stochastic equilibrium sorting model where (1) income is the sole dimension of household heterogeneity, (2) households form state-contingent housing location plans that may involve moves over their lifetimes, (3) households choose whether to own or rent depending on the housing expenditure risk associated with each tenure mode, and (4) there is a probability that newcomer households move in and compete for homes with native households. Income mixing within neighborhood arises for two reasons. First, allowing natives to form state-contingent housing location plans breaks the indivisibility of housing consumption implicit in the literature where households choose their location once and for all. Second, natives can insure themselves against rent fluctuations by buying their home prior to the realization of the population shock; newcomers cannot. As a result, poorer natives stay in the more desirable communities and only richer newcomers move in these communities. Evidence from U.S. metropolitan areas supports the effects predicted by the model. |
| JEL: | R21 R12 D31 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:594&r=ure |
| By: | Gordon B. Dahl; Lance Lochner |
| Abstract: | Understanding the consequences of growing up poor for a child's well-being is an important research question, but one that is difficult to answer due to the potential endogeneity of family income. Past estimates of the effect of family income on child development have often been plagued by omitted variable bias and measurement error. In this paper, we use a fixed effect instrumental variables strategy to estimate the causal effect of income on children's math and reading achievement. Our primary source of identification comes from the large, non-linear changes in the Earned Income Tax Credit (EITC) over the last two decades. The largest of these changes increased family income by as much as 20%, or approximately $2,100. Using a panel of over 6,000 children matched to their mothers from National Longitudinal Survey of Youth datasets allows us to address problems associated with unobserved heterogeneity and endogenous transitory income shocks as well as measurement error in income. Our baseline estimates imply that a $1,000 increase in income raises math test scores by 2.1% and reading test scores by 3.6% of a standard deviation. The results are even stronger when looking at children from disadvantaged families who are affected most by the large changes in the EITC, and are robust to a variety of alternative specifications. |
| JEL: | I3 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11279&r=ure |
| By: | Mihails Hazans (Baltic International Centre for Economic Policy Studies BICEPS); Olga Rastrigina (CEU); Ija Trapeznikova (North- Western University) |
| Abstract: | Parental education is found to have a strong positive effect on propensity to enroll in and complete secondary and tertiary education, both in Soviet times and during transition, but mother’s education effect have been weakening. A human capital gap between titular ethnicities and Russian speaking minorities has emerged in all three countries and remains significant after controlling for parental education. In Estonia and Latvia, ethnic gap in secondary enrollment reinforces inequality of human capital distribution between ethnicities. The unexplained ethnic gap in tertiary attainment has been declining in Lithuania (despite absence of Russian language higher education) but widening in Latvia. |
| Keywords: | Parental education; ethnic minorities; transition |
| JEL: | J24 J15 P51 |
| Date: | 2005–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpla:0505002&r=ure |
| By: | Viola Angelini; Peter Simmons |
| Abstract: | We consider the interaction between the risk of unemployment, random house prices, consumption and savings. A critical decision is that of refinancing house purchase, up to 100% mortgages are possible. There is also a fixed transaction cost of refinancing. In a CARA framework we derive the value function for a finite horizon, the policy of refinance and the consumption function. Either there is a maximum mortgage or a zero mortgage depending on interest rates, house prices and the transaction cost. The consumption function is linear in wealth and in the uncertainty caused by employment status and house prices of the future. Since there is either 100% or 0% equity withdrawal, consumption jumps when there is refinancing. |
| Keywords: | Precautionary savings; employment risk; mortgages; housing |
| JEL: | D11 D14 E21 |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:05/07&r=ure |
| By: | David E. Clark (Department of Economics, Marquette University); Robert Griffin (Department of Communications, Marquette University); Vladimir Novoty (Department of Civil and Enviornmental Engineering, Northeastern University) |
| Abstract: | The urbanization of urban watersheds can influence flooding risks. Traditional Federal Emergency Management Agency (FEMA) flood risk maps identify 100 year floodplains. These maps are updated infrequently. However, as a community urbanizes, flood risks can change, especially for downstream residents. Thus, one would expect that the willingness to pay (WTP) to prevent the worsening of flooding risk would depend in part on the location of the household in the community and their associated flooding risk. Economists and regional scientists have evaluated the role played by traditional demographic factors. However, attitudinal factors measuring community norms, political philosophy, and other psychological factors that may be unique to the individual have not received the same level of scrutiny. Milwaukee, WI has experienced major flooding events, classified as floods with an expected frequency of once every 100 years or less, in 1986 and most recently in 1997 and 1998. In this study, 1000 residents of the Menomonee watershed in Milwaukee were interviewed in a two-wave panel survey (i.e., telephone interviews took place in 2000 and 2001) to determine their willingness to pay for a referendum which would prevent flood risks from worsening. The interviews queried respondents about their attitudes concerning flooding and ecological risks, political beliefs, information seeking behavior, and other psychological factors unique to the respondent. Information was also gathered on demographic characteristics of the respondent, and also that individuals address. The address was geocoded and hydrologic modeling was used to determine the unique flood risk associated with the residence. A willingness to pay function was estimated using Tobit analysis. Preliminary findings indicated that all three categories of factors influence willingness to pay, with psychological factors and flood risk factors having a relatively strong impact on willingness to pay. Paper prepared for the 2005 Annual Meetings of the Midcontinent Regional Science Association and the Southern Regional Science Association in Arlington VA, April 8-10, 2005. PLEASE DO NOT QUOTE WITHOUT PERMISSION. |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:mrq:wpaper:0503&r=ure |