Ethnic Networks and Price Dispersion

We offer and test a model linking ethnic networks to global price dispersion which predicts lower price dispersion as shared ethnic populations between countries rise, effects that may reverse at higher levels as network discipline breaks down. Using Chinese, Indian and Japanese data, we find that country pairs linked by the Chinese network have significantly lower mean price dispersion. A one standard deviation increase in the size of the Chinese coethnic network lowers price dispersion by 6–33%, an effect that reverses as the network gets large. No such evidence exists for the Indian or Japanese networks.     

The modern impact of precolonial centralization in Africa

We empirically assess the possibility, stressed by African scholars, that stronger precolonial political institutions allowed colonial and postcolonial African governments to better implement modernization programs in rural areas. Using anthropological data, we document a strong positive association between the provision of public goods such as education, health, and infrastructure in African countries and the centralization of their ethnic groups’ precolonial institutions. We develop an empirical test to distinguish among alternative explanations for this finding. The evidence supports the view that precolonial centralization improved public goods provision by increasing the accountability of local chiefs. Our results stress the importance for developing countries to create mechanisms to monitor local administrators of public projects. These mechanisms should be consistent with these countries’ preexisting and informal arrangements.     

Labour supply, foreign investment and welfare in the presence of public infrastructure

Within the context of a small open economy where both foreign investment and the provision of public infrastructure are endogenous, this paper examines the impact of an exogenous increase in labour supply. An increase in labour supply can be attributed to labour inflow. A number of empirical studies have demonstrated the importance of public infrastructure in real economies and both developed and developing countries have attracted significant foreign investment in recent years. This paper shows that, in the case of a diversified equilibrium, variations in labour supply do not affect the wage rate, provision of public infrastructure or welfare. However, an increase in labour supply decreases foreign investment as long as the producers of the private goods derive equal benefits from public infrastructure. In the case of complete specialisation, an increase in labour supply increases the provision of public infrastructure, which leads to an increase in the wage rate and foreign investment. An increase in labour supply increases welfare as long as the provision of public infrastructure involves some fixed cost.     

Contracting welfare-to-work services

This paper provides an empirical analysis of contracting decisions in the provision of welfare-to-work (WTW) services. Our findings suggest that contracting decisions are predominantly driven by cost considerations, both for the decision to contract with other municipalities and the share of contracting out to private providers.     

Labour hoarding,employment and unemployment in British manufacturing industry

The impact of the provision of public infrastructure on private economic activity is examined. Using a flexible functional form of a cost function with public infrastructure as an additional external input the paper estimates the shadow-price of public infrastructure services for the manufacturing, trade and transport and the construction industries. The results indicate significant cost savings that result from the provision of public infrastructure services. In addition, the paper investigates both empirically as well as theoretically, the question whether the neglect of the provision of public capital within the growth accounting framework provides an explanation for the generally observed productivity slowdown.     

Optimal annexation

Previous empirical studies of the effects of annexation on municipal expenditures and municipal efficiency have yielded mixed results. Here it is argued that as municipalities grow through annexation, there may be administrative and service delivery efficiencies that, at least for a time, more than offset the inefficiencies of a heightened degree of monopoly power in the provision of infrastructure and services. If this is the case, then the rates of growth of both per capita taxes and per capita spending will decrease with annexation. Eventually, though, administrative and service inefficiencies are likely to develop as the city's geographic area and population base increase, and monopoly inefficiencies are likely to worsen. If this is the case, then the rates of growth of both per capita taxes and per capita spending will increase with annexation. Thus, there may be some level of annexation activity at which the growth of per capita taxes and the growth of per capita spending will be minimized. Municipal annexation, taxation, and expenditure outcomes from the 1970s are analysed in an empirical framework that reflects the interactions among these variables in dynamic municipal settings. The results are consistent with the existence of an optimal level of annexation.     

Tenure Choice with Location Selection: The Case of Hispanic Neighborhoods in Chicago

A notable feature of immigration into the United States is the high degree of spatial concentration of different immigrant groups. This article asks the question whether residing in areas with a large proportion of a coethnic group influence the decision to own a home for Hispanics in the Chicago metropolitan area. The results show that Hispanics choose to live in Hispanic enclaves based on relatively homogeneous characteristics, such as recent migration, less English language fluency, and lower income. More years in the United States, higher education attainment, and English language fluency remain strong predictors of homeownership. Individuals are less likely to be homeowners in communities with a larger coethnic concentration, foreign-born residents, or lower-income families. (JEL C35 , J1 , R12 )     

基础设施投资对社会其他部门投资影响效应

基础设施投资在经济发展中起着十分重要的作用,直接影响着经济发展的速度和质量。文章通过建立计量模型,运用1993—2003我国30个省市(自治区)的面板数据,研究了我国基础设施投资对社会其他部门投资的影响。结果发现基础设施投资对社会其他部门投资具有明显的挤入效应,其中西部地区最大,中部地区次之,东部地区最小。最后提出政策建议:提高财政支出效率,加快基础设施领域改革,加快西部地区基础设施建设。     

Political preferences and public sector outsourcing

Given the intensive and ideologically charged debate over the use of private contractors for publicly funded services, it is somewhat surprising that many social scientists have preferred to explain government outsourcing by the pursuit of economic efficiency. Starting out from different theories, we investigate political explanations of government outsourcing using a Swedish data set in which outsourcing varies between municipalities and over time, as well as between services. Our identification strategy focuses on two services with similar contracting problems and local market conditions: preschools and primary schools. We study a period in which Swedish municipalities had full discretion in the provision of preschools, while their influence on the private provision of primary education was limited by a national voucher system. The comparison of preschools with primary schools in a difference-in-differences model suggests that the political color of the ruling majority influences outsourcing, which is consistent with the Citizen Candidate model of representative democracy.     

Coordination and cooperation in asymmetric commons dilemmas

In this paper we discuss laboratory experiments that address the problem of self-governance in an asymmetric commons dilemma. Small-scale irrigation systems that provide food for hundreds of millions of people around the world are probably the most common example of such dilemmas. Here, we formulate an abstract dilemma in which subjects make both a decision about investment in the provision of infrastructure associated with the use of a resource and about how much to extract from the common-pool resource made available by this infrastructure. The impact of inherent asymmetry in irrigation systems on the provision of a resource and the impact of communication on the capacity of the group to solve the two-level commons dilemma of cooperation and coordination based on the analysis of the experimental data are discussed.     

Ethnic identities,public spending and political regimes

Do democracies discriminate less against minorities as compared to non-democracies? How does the dominance of an ethnic group affect discrimination under various political regimes? We build a theory to analyse such questions. In our model, political leaders (democratically elected or not) decide on the allocation of spending on different types of public goods: a general public good and an ethnically-targetable public good which benefits the majority ethnic group while imposing a cost on the other minorities. We show that, under democracy, lower ethnic dominance leads to greater provision of the general public good while higher dominance implies higher provision of the ethnically-targetable good. Interestingly, the opposite relation obtains under dictatorship. This implies that political regime changes can favour or disfavour minorities based on the ambient level of ethnic dominance. Several historical events involving regime changes can be analysed within our framework and are consistent with our results.     

The Impact of Immigration on the Size of Government: Empirical Evidence from Danish Municipalities

Several studies have reported a negative relationship between ethnic heterogeneity and the size of the public sector. One problem with this literature is that ethnic composition is hardly exogenous, which obstructs attempts to reveal causal mechanisms. This paper explores the impact of changes in ethnic heterogeneity in Danish municipalities from 1995 through 2001, a period marked by an unprecedented influx of refugees. A state‐sponsored placement policy restricted their choice of residence and required local governments to accept them as citizens. The analysis of the impact of this influx has not revealed any support for the claim of a decline in public sector size.     

Does fiscal decentralization foster regional investment in productive infrastructure?

The aim of this paper is to analyze the effect of revenue decentralization on the provision of infrastructure at the sub-national level. We estimate the effects of revenue decentralization and earmarked grant financing on the level of sub-national infrastructure investment in 20 European countries over the period 1990–2009. The results are interpreted in light of the predictions of the theory on fiscal federalism. We find that it is sub-national infrastructure investment that increases after revenue decentralization and not investment in redistribution. However, the effect of revenue decentralization is lower the higher the use of earmarked grants to fund infrastructure investment.     

Favouritism towards the poor and a discontinuous tax structure

This article aims to theoretically clarify two points. First, even though the government shows favouritism to the poor and wants to exempt low-income taxpayers and to secure the necessary income tax revenue by taxing only high-income taxpayers, the government nevertheless ends up taxing the poor. This is in opposition to favouritism and arises because of the government’s inability to observe the individual taxpayer’s income levels. Second, even without observing each taxpayer’s income level, if favouritism is sufficiently strong, then the government can discontinuously resolve such unintentional taxation.     

Natural resource windfalls and efficiency in local government expenditure: Evidence from Peru

We study the role of natural resource windfalls in explaining the technical efficiency of public expenditure. Using a rich dataset of expenditure and public good provision for 1836 municipalities in Peru for the period 2001–2010, we estimate a nonmonotonic relationship between the efficiency of public good provision and the level of natural resource transfers. Local governments that were extremely favored by the boom in mineral prices were more efficient in using fiscal windfalls, whereas those that only benefited from modest transfers were more inefficient. These results can be explained by the increase in political competition associated with the boom. However, the fact that increases in efficiency were related to reductions in public good provision casts doubts on the beneficial effects of political competition in promoting efficiency.     

Labor Inflow Induced Wage Inequality and Public Infrastructure

By making use of a simple general equilibrium model of a small open economy, the author examines the link between labor mobility and the size of wage inequality in the presence of productive public infrastructure. The paper shows that the provision of public infrastructure plays an important part in determining the size of labor inflow induced wage inequality. Specifically, it shows that, irrespective of the relative factor intensities, a small inflow of either skilled or unskilled labor does not affect the size of wage inequality if private industries derive equal benefits from public infrastructure provision. A small inflow of skilled (unskilled) labor increases (decreases) wage inequality if skilled (unskilled) labor intensive industry derives more benefits from public infrastructure.     

Firms and regional favouritism

Using an unbalanced panel of 539 Vietnamese districts from 2000 to 2010 and the corresponding politicians’ profiles, we examine firm behaviour in response to favouritism by top-ranking politicians towards their districts of birth. Results show that the number of firms tend to increase in the home districts of politicians after they assume office. This favouritism is particularly pronounced for private domestic firms, construction firms and rural areas. However, state-owned firms are indifferent. We discuss the non-response of state-owned firms, potential mechanisms and channels behind the statistical results.     

GAMBLING WITH TAX DOLLARS

Municipalities often spend money in the hopes of generating new tax revenue. Because the estimated increase in tax revenues is uncertain, these policies are essentially gambles with tax dollars. This paper shows that it is possible for a welfare-maximizing government to exhibit risk-loving behavior even though individual taxpayers are risk-averse. This risk-loving behavior may occur when the government has the option to provide an indivisible public good, such as a park. Interestingly, the poorest and wealthiest municipalities do not find gambles optimal. For communities that find gambles optimal, both the provision of the public good and tax rates are affected.     

Demand for locally provided public services within the median voter's framework: the case of the Brazilian municipalities

In this paper we estimated the demand for local public spending for the Brazilian municipalities within a median voter's framework. The rationale for applying that framework came from the fact that in federal systems voters’ preferences are more likely to be reflected at the local level as the consumers of public services have a better knowledge of the benefits and costs of the local public expenditures. Results obtained are consistent with the theoretical background thus suggesting that this hypothesis might be useful to describe the demand for local public goods in Brazil. In particular, the use of quantile regression permitted us to investigate the impacts of the conditioning variables on local public expenses across different expenditures classes thus allowing for heterogeneity across municipalities. Our results also suggest that the impact of the city size on the quality of club goods shows crowding effects as γ is between zero and one. However, in the estimated models, marginal congestion slightly decreases with expenditure. This is a rather surprising result as one is tempted to conclude that the congestion effect should be higher on big cities. Yet, a more careful look shows the drawbacks of such an interpretation. The indivisibilities preclude the provision of certain services in small towns, concentrating their provision on larger cities. Hence, the higher expenditures of those big cities reflect not only a crowding cost but also the fact that these towns offer a wide range of services when compared to the small ones.     

Institutions, infrastructure, and economic growth

This paper develops a structural model of infrastructure and output growth that takes account of institutional and economic factors that mediate in the infrastructure–GDP interactions. Cross-country estimates of the model indicate that the contribution of infrastructure services to GDP is substantial and, in general, exceeds the cost of provision of those services. The results also shed light on the factors that shape a country's response to its infrastructure needs and offer policy implications for facilitating the removal of infrastructure inadequacies.