Democracy,rent seeking,public spending and growth

Does democratization imply faster growth, less corruption and less inefficiency? Past studies yield ambiguous results on the effects of democracy on economic performance and growth. We develop a simple two-sector endogenous growth model that shows both very young and mature democracies grow faster than countries in mid stages of democratization, producing a ‘U’ effect. This effect results from the pattern of rent seeking as it diverts from the provision of public goods. Rent-seekers act as monopolistic competitors. Initially, more democracy increases their number, raising aggregate rents. However, rents per rent-seeker fall with the number of rent seekers. Due to this crowding effect and the increased competition among rent seekers, aggregate rents fall in mature democracies. Thus, rents show an ‘inverted-U’ effect in relation to democracy. We find fairly robust supportive evidence for the latter.     

Education and the Public Goods Type of Social Capital: Are the Well Educated Free Riding in the Provision of Public Goods?

In the previous literature, education has been found to promote the individual’s investment in social capital. However, little is known about its effect on the public goods type of social capital as many of the studies have used generalized measures of social capital. Using survey data from Japan with information on participation in neighborhood associations and community activities, we find that individuals with higher education are no more likely than those with compulsory minimum education to invest in the public goods type of social capital. Nor do we find evidence that the more educated free ride on the less educated in the provision of public goods.     

Public provisions of professional services

Professional services are credence goods provided by certified experts (professionals). The most prominent examples of professional services are medical or legal services. Interestingly, the markets for such services are often subject to partial public provision: there is a low-end segment, where the services of basic quality are provided for free and professionals are reimbursed by the government, and a high-end segment, where free-market principles prevail. We examine the efficiency of this market structure. To this end we apply a modified version of the model of the market for goods with credence attributes proposed by Baron. We demonstrate that partial public provision can correct for the market failure caused by the credence good nature of professional services, even in the presence of regulation costs. The efficiency gain from partial public provision is due to a combination of quality and price effects.     

Optimal Redistribution with Productive Social Services

Publicly‐provided private goods are conventionally considered consumer goods. Departing from this perspective, we analyze the public provision of inputs that improve household productivity (e.g., education and childcare). In a two‐class economy with distorting taxation, public provision is always welfare improving with respect to pure taxation, given that the public input directly affects household productivity. Moreover, the case for public provision strengthens as households' heterogeneity in input demand fades out, contrary to consolidated results in the literature. The features of optimal provision schemes depend on the nature of publicly provided input, namely, if it substitutes household productive capacity or just helps households to exploit it.     

Inequality,public good provision and the composition of trade

This paper investigates the effect of trade liberalization on the provision of public goods and shows that inequality also plays a vital role here. Public goods help enhance the productivity of firms, lower prices and raise profitability. The provision of public goods has different effects in closed and open economies. In an open economy, the impact of productive spending on increasing profit is stronger. Consequently, the opening up of the economy shifts the benefits of productive public goods from consumers to firms. As the median voters’, share of the firm’s profit rises, public goods become more appealing and flourish. Consequently, the manufacturing export is boosted by a rise in productivity.     

Social network and private provision of public goods

Using a simple model with interdependent utilities, we study how social networks influence individual voluntary contributions to the provision of a public good. Departing from the standard model of public good provision, we assume that an agent’s utility has two terms: (a) ‘ego’-utility derived from the agent’s consumption of public and private goods, and (b) a social utility which is the sum of utility spillovers from other agents with whom the agent has social relationships. We establish conditions for the existence of a unique interior Nash equilibrium and describe the equilibrium in terms of network characteristics. We show that social network always has a positive effect on the provision of the public good. We also find that, in networks with “small world”-like modular structures, ‘bridging’ ties connecting distant parts of social network play an important role inducing an agent’s contribution to public good. Assumptions and results of the model are discussed in relation to the role of social capital in community-level development projects and to the effect of innovation networks on firms’ R&D investments.     

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.     

Multinational public goods provision under multilateral income transfers and productivity differences

This article examines multinational public goods provision under multilateral income transfers and productivity differences across countries. Under a planner who uses linear approximation for utility maximization, we show that (1) a country is an income receiver if it has a higher productivity than the average in producing public goods, enabling it to provide more public goods; (2) the amount of transfers can be pinned down for all countries with an adjustment cost; (3) each country obtains an identical utility increment; and (4) the country with the lowest adjustment cost is the best candidate for the planner country. All results are derived based on well-known information regarding the cost of producing the public goods and income levels.     

全球性共用品供应的分配问题

全球性共用品的供应涉及到许多问题,而这些问题在经济学文献中一直没有得到重视,其中包括对全球性共用品最优供应量的合适度量问题和在评价其供应不足、生产和使用时所产生的分配问题。此外,全球性共用品的有关性质以及获取途径也是需要加以说明的内容。本文最后将就共用品供应中的分配政策问题提出若干可行的解决方案。     

Hypothetical Bias Reconsidered: Payment and Provision Uncertainties in a Threshold Provision Mechanism

We extend research on the consequentiality of stated preference choices to a threshold provision mechanism for public goods. We develop a simple theoretical model of option price to analyze how option price varies with payment and provision uncertainty. We explore whether threshold provision contributions are similarly influenced by payment and provision uncertainty using an induced value contribution experiment. Results suggest that: (1) the probability of payment has a negative effect on contributions; (2) the probability of provision has a positive effect on contributions. We offer subjective beliefs regarding payment and provision as a plausible systematic explanation for hypothetical bias.     

Tax competition and the political economy of public employment: a model for Austria

In this work, we simulate the effects of the tax autonomy of the Austrian states on the levels of public employment in each state. We show that depending on the strength of the public sector lobby, tax autonomy would require a reduction of employment in the public sector of between 25 and 35% of the current level. We also show that tax autonomy increases welfare levels by 1–1.5%; that is, the positive change in the disposable income of the workers more than offsets the welfare loss resulting from the lower provision of public goods. Finally, we show that the reduction of public employment is superior in terms of welfare to an alternative scenario in which employment levels are held constant but the wage levels in the public sector are adjusted.     

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.     

Should governments stop subsidies to private goods? Evidence from rural Latin America

This paper empirically documents the effects of subsidizing private goods to the detriment of the government's supply of public goods. We use a new data set from the rural sector in fifteen Latin American countries over the period 1985–2001 collected using a methodology that allows us to separate government subsidies to private goods from expenditures in the provision of public goods. The econometric evidence shows that the government's decision to subsidize either private or public goods has dramatic consequences for economic development. Reducing the share of subsidies to private goods (or, equivalently, increasing the share of public goods) in the government's budget has, ceteris paribus, a large and significant positive impact on rural per capita income, reduces certain undesirable environmental effects associated with output expansion, and contributes to poverty reduction.     

Demand for collective goods in private nonprofit markets: Can fundraising expenditures help overcome free-rider behavior?

Economic theory ascribes the primary role in the provision of public goods to government. This emphasis on government overlooks the role of the not-for-profit sector in providing collective-type goods. In this paper we seek to determine the factors influencing charitable contributions to private nonprofit organizations by estimating a demand function for the output of these collective-good providers. Specifically, we test the hypothesis that voluntary giving is responsive to conventional market variables such as advertising expenditures, price, and quality. Overall, the results are strongly supportive.     

Migrants' Home Town Associations and Local Development in Mali

We explore the impact of migrants' Home Town Associations (HTAs) on the provision of public goods in Mali. We combine an original dataset on all the HTAs created by Malian migrants in France from 1981 with census data on public goods in all Malian villages since 1976, and we run double‐difference estimations to compare villages with and without an HTA, before and after the creation of the HTAs. We find robust evidence that the provision of schools, health centers, and, to a lesser extent, water amenities has increased significantly faster in villages targeted by an HTA between 1987 and 2009 than in control villages.     

Publicly Provided Private Goods and Redistribution: A General Equilibrium Analysis

Public provision of private goods is examined within a self-selection framework where production depends on labour supply of different households and the level of public provision. It is shown that productivity and wage-structure effects can create a role for public provision, even if preferences are weakly separable between goods and leisure. Public provision of education may offer an intuitively appealing case for the production-side impacts. We also address the reasons for public provision in a dynamic, overlapping generations economy, whereby public provision may affect efficiency and social costs of redistribution of future generations as well.
JEL classification : H 23; H 42     

省直管县改革对县域公共物品供给的影响——基于河北省136县(市)面板数据的实证分析

基于河北省136个县(市)2003～2007年的相关社会经济数据,文章建立面板数据实证分析了省直管县改革对县域公共物品供给的影响。研究发现,省直管县改革在显著提高县域生产性公共物品供给水平的同时,显著降低了县域服务性公共物品的供给水平;而且除人口规模外,省直管县改革对县域公共物品供给的影响关系并不会受到县域环境因素的影响。     

A generalized impure public good and linear characteristics model of green consumption

This paper provides a general framework for understanding consumer behavior related to goods and services that may be considered environmentally friendly, ethically produced, fairly traded, or some combination thereof. We generalize the impure public good model and derive its comparative static properties. The model accounts for any number of impure public (green) goods and joint production of any number of both private and public characteristics. The generalization provides a bridge between the impure public good model and the well-known linear characteristics model, both of which are special cases of the model developed here. The results show how demand for green goods and characteristics such as environmental quality depends on wealth, exogenously given levels of public goods, and the technologies of joint production. The effects of changes in technology depend critically on whether jointly produced characteristics are complements or substitutes in consumption. Several of the results are rather counterintuitive and differ in meaningful ways from existing models of impure public goods and linear characteristics. The results also illuminate several reasons for greater caution about whether it is reasonable to assume that green goods and services are necessarily beneficial for the provision of public goods.     

公共产品提供的逻辑

从市场失效推导出来的公共产品理论不能有效地区分公共与私人产品,也不能解释公共提供的事实。本文试图从另一个角度讨论什么是决定产品公共提供的根本原因,并以外部性—效用相互依存性—公共提供这样的顺序来推导公共产品提供的逻辑。