THE ERRONEOUS USE OF CHINA'S POPULATION AND PER CAPITA DATA: A STRUCTURED REVIEW AND CRITICAL TEST

Hundreds of studies in economics misinterpret China's subnational population and per capita data. The most widely used population counts are of hukou registrations from each province, prefecture, county, or city rather than of the people living in each place and generating local gross domestic product. Over 220 million people have left their place of registration, while almost none had when reforms began, creating time-varying errors in estimates of per capita income of subnational units. We survey empirical articles in blue ribbon journals, in development journals, and in regional and urban economics journals that use China's subnational data. Over 80% of articles use these data erroneously; most commonly the wrong population or employment counts are used to measure the size of subnational units, and per capita data are calculated with the wrong denominator for how variables are interpreted. We provide examples of errors from each group of journals, and a critical test of one highly cited study. Specifically, we show that if hukou registrations are erroneously used to measure the local population, following existing practice, conclusions about driving forces for urban area expansion are reversed. We give recommendations for more careful use of China's subnational population and per capita data.     

Soft budget constraints and strategic interactions in subnational borrowing: Evidence from the German States, 1975-2005

Cooperative federations are usually characterized by the existence of bailout guarantees and intergovernmental transfer schemes. This paper explores whether such features of cooperative federations lead to subnational soft budget constraints using panel data from the German States covering the 1975-2005 period. The methodology is based on the premise that subnational governments’ borrowing will exhibit vertical and horizontal strategic interactions if they operate under soft budget constraints. Therefore, a test for strategic interactions in subnational borrowing can be used to infer whether a cooperative federation like Germany is susceptible to soft budget constraints. The results suggest that state borrowing in Germany exhibited horizontal but not vertical interactions during the time-frame of the analysis. This indicates (i) that German States faced soft budget constraints and (ii) that they were more concerned about the likelihood of a bailout than about its volume.     

VOTING, INEQUALITY AND REDISTRIBUTION

Abstract.  This paper surveys models of voting on redistribution. Under reasonable assumptions, the baseline model produces an equilibrium with the extent of redistributive taxation chosen by the median income earner. If the median is poorer than average, redistribution is from rich to poor, and increasing inequality increases redistribution. However, under different assumptions about the economic environment, redistribution may not be simply rich to poor, and inequality need not increase redistribution. Several lines of argument are presented, in particular, political participation, public provision of private goods, public pensions, and tax avoidance or evasion.     

JUSTIFICATIONS FOR REDISTRIBUTION: A CRITIQUE

It is striking that there are so many theoretical justifications of redistribution by government. Is it because each single justification is weak? I review and criticise the various arguments advanced in the literature. The main distinctions are between (a) Paretian justifications asserting that all, including the net payers, benefit from redistribution, (b) theories of justice and (c) utilitarianism. My conclusion is that redistribution ought to be based on Paretian arguments as far as possible and that helping the poor is more likely to maximise the happiness of all than is a general levelling of income differences.     

Redistribution and the Nature of Altruism: Should Welfare Programs be Centralized or Decentralized?

Decentralization of income redistribution may lead to policy competition between jurisdictions and therefore underprovision of redistribution. The ability to carry out redistribution programs is therefore an argument in favor of allocating this responsibility to some higher level authority. On the other hand, empirical results show that the taste for redistribution is lower in multi-ethnic jurisdictions than in more homogenous ones. Centralized redistribution may encompass a larger number of ethnic minorities, and thereby negatively affect redistribution programs. The present paper models the trade-off between these two forces and argues that this trade-off will depend on the nature of altruistic preferences. We would like to thank two anonymous referees for constructive comments and suggestions. The usual disclaimer applies. We would also like to thank Ruhrgas AG for financial support, and Wissenschaftzentrum Berlin (WZB) for hosting us during the summer of 2003, when this paper was written.     

Why ‘Good Governance’ Fails: Lessons from Regional Economic Development in Colombia

By critically reviewing different strands of literature on institutional change and development, this essay argues that, in order to fully understand subnational economic development, we need to move away from ‘good governance' explanations in which geography‐specific analyses of power structures and elite interests are largely absent. Using findings for Colombia and insights from economic geography and heterodox political economy theories, this essay gives theoretical and conceptual guidelines and approximations for future studies on regional economic development. The contribution provides a place‐based discussion of how the historically evolved distribution of power balances, context‐specific elite interests, and the interaction between place‐bound actors and place‐less dynamics affect subnational institutional arrangements shaping policies and development outcomes. The conclusions drawn are not limited to Colombia and will prove beneficial to researchers studying regional economic development in subnational contexts elsewhere in the world.     

Measuring Urban Well-Being

A BSTRACT . Studies attempting to measure social well-being that focus attention at national levels fail to provide insights into the actual conditions that are present at subnational levels. With increased attention being focused on the conditions of urban areas, the need for subnational evaluation is becoming more apparent. The growing diversity of the population and the increase in female-headed households leave researchers without resources for evaluating the conditions of these groups in smaller regional settings, in part due to the scarcity of well-being measurements at these levels. This study hopes to fill in the gap for measuring well-being at subnational levels by estimating indexes at the county level. Exactly how the level of urbanization and social well-being are related is the subject of our inquiry. Our estimations will focus on urban counties, with particular emphasis on the 50 largest counties. We aim to evaluate the well-being of the general population in metropolitan areas, comparing it to those for female heads of households and people of color.     

Use and abuse of regulated prices in electricity markets: “How to regulate regulated prices?”

We consider the regulation of the tariffs charged by a public utility in the electricity sector. Consumers differ in terms of their privately known demands. When regulating a firm's tariffs, the government is concerned by the redistribution across consumer classes. A conflict between redistribution and screening induces pricing distortions when the firm is a monopoly. Introducing competition with an unregulated fringe improves efficiency but jeopardizes redistribution. In response to this problem, the government may now want to manipulate information about the incumbent's cost to restrict entry and better promote its own redistributive objective. To prevent such obstacle to entry, the government's discretion in fixing the incumbent's regulated tariffs should be restricted by imposing floors or caps on those tariffs and/or by controlling the market share left to the competitive fringe. We highlight the determinants of such limits on discretion and unveil to what extent they depend on the government's redistributive concerns.     

Rescaling and reforming the state under NAFTA: implications for subnational authority

The new free trade agreements are rescaling governance in ways that have critical implications for subnational governments. The nation state is not simply being hollowed out; rather, a new governance nexus is forming — of nation states, multinational corporations and international agreements — which explicitly excludes subnational and local government voice. This article describes the new governance features of the North American Free Trade Agreement (NAFTA) and illustrates how they work out at the national, subnational and local scales using cases from the United States and Mexico. NAFTA provides the template for other free trade agreements including the Free Trade Area of the Americas (FTAA) and a growing number of bilateral agreements. We show how NAFTA's governance structure is undermining subnational and local government authority in legislative and judicial arenas. Designed to advance privatization of public services, these agreements undermine the very ability of local governments to use markets for public goods by defining traditional state and local governance mechanisms as ‘non‐tariff barriers to trade’. Contradictions between private profit and public interest appear at the subnational level but their resolution is engaged at the global level between private investors and the nation state. Recognition of this rescaling requires attention to the reforming state and its implications for subnational authority and democratic representation and voice. Les nouveaux accords de libre‐échange ré‐échelonne la gouvernance selon des modalités aux implications critiques pour les gouvernements infra‐nationaux. L'État‐nation n'est pas seulement en train d'êvidé de son contenu, mais une nouvelle sphère de gouvernance se forme —à partir d'États‐nations, de groupes multinationaux et d'ententes internationales —, excluant explicitement toute voix de gouvernements locaux ou infra‐nationaux. Cet article décrit les nouvelles caractéristiques de la gouvernance selon l'Accord de Libre‐Échange Nord‐Américain (ALENA) et illustre, avec les cas des Etats‐Unis et du Mexique, comment elles opèrent aux échelons national, infra‐national et local. L'ALENA fournit un modèle pour d'autres accords de libre‐échange, comme la Zone de Libre‐Échange des Amériques (ZLEA) et un nombre croissant de conventions bilatérales. L'article montre comment la structure de gouvernance de l'ALENA mine l'autorité des gouvernements locaux et infra‐nationaux dans les domaines législatif et judiciaire. Destinés à favoriser la privatisation des services publics, ces accords sapent l'aptitude même des gouvernements locaux à recourir aux marchés pour les marchandises publiques, puisqu'ils définissent les mécanismes de gouvernance locale et étatique traditionnels comme des ‘barrières commerciales non‐douanières’. Les contradictions entre profit privé et intérêt public apparaissent au niveau infra‐national, mais leur résolution est entreprise au niveau mondial entre investisseurs privés et État‐nation. La reconnaissance de ce décalage d'échelon appelle à s'intéresser à l'État réformateur et aux implications pour toute autorité infra‐nationale et représentation ou voix démocratique.     

Business cycles and redistribution: The role of government quality

We study how government quality mediates the relationship between business cycles and redistribution. Our key hypothesis is that the potential of income redistribution to reduce rising inequality levels after an economic crisis depends on government quality. The empirical evidence based on a panel of 46 countries over the period 1996–2016 lends strong support to this hypothesis. We find that macroeconomic recessions promote redistribution of income in high government quality contexts, but they lead to wider economic inequalities in countries with poor quality of government.     

Improving perishable product inventory management using goal programming

The multiple objectives of perishable product inventory management are examined in this paper. These objectives include: (1) satisfying demand by carrying sufficient inventories, (2) holding down inventory carrying costs, (3) keeping the amount of product spoilage (outdating) at an acceptable level, and (4) maintaining quality by using the product while it is still fresh, and (5) keeping the cost of rotation low. Some of the above objectives are in conflict. Thus, certain redistribution policies may help attain one or more of these objectives to a greater extent. Redistribution involves the transfer of the product from outlets where demand is low to outlets where demand is high. A goal programming model for solving redistribution problems is presented. An example is provided and sensitivity analysis is performed in order to determine when redistribution is advantageous. Applicability of the model is discussed.     

Local fiscal policy after a bailout: austerity or soft budget constraints?

Do higher-level governments enforce austerity after bailing out indebted subnational governments or are bailouts a free lunch for the recipients? Analyzing this question empirically is difficult because bailouts are not granted randomly. This paper suggests a method to evaluate the fiscal consequences of subnational bailouts that does not rely on institutional details to obtain quasi-exogenous variation. The main idea is to combine matching and difference-in-differences designs. In a second step, I apply this method to study how bailouts affect the fiscal policy of recipient municipalities in the German federal state of Hesse. Combining disaggregated budget data with data on bailout payments over more than a decade, I find that municipalities consolidate their budgets after they receive a bailout from the state government. While this finding is specific to the German federal context, the proposed methodology can be used, due to its flexibility, to study the fiscal consequences of bailouts in various other settings.     

NIGHT LIGHTS IN ECONOMICS: SOURCES AND USES1

Night lights, as detected by satellites, are increasingly used by economists, typically as a proxy for economic activity. The growing popularity of these data reflects either the absence, or the presumed inaccuracy, of more conventional economic statistics, like national or regional GDP. Further growth in use of night lights is likely, as they have been included in the AidData geoquery tool for providing subnational data, and in geographic data that the Demographic and Health Survey links to anonymized survey enumeration areas. Yet, this ease of obtaining night lights data may lead to inappropriate use, if users fail to recognize that most of the satellites providing these data were not designed to assist economists, and have features that may threaten validity of analyses based on these data, especially for temporal comparisons, and for small and rural areas. In this paper, we review sources of satellite data on night lights, discuss issues with these data, and survey some of their uses in economics.     

ECONOMIC IMPLICATIONS OF POLICY RESTRICTIONS ON WATER WITHDRAWALS FROM SURFACE AND UNDERGROUND SOURCES

The appropriation of water for economic activities is limited by regional surface and underground endowments, and symptoms of environmentally unsustainable withdrawals are already visible in many regions of the world. In this paper we investigate the economic implications of water policy imposing source- and region-specific restrictions on water withdrawals taking the Mexican economy as a case study. We use an inter-regional input–output model of Mexico's hydro-economic regions to allocate production subject to the availability of water and other factors of production. Water sustainability requires a reduction of 7.5?km³/yr of groundwater withdrawals, which is compensated by an increase of 3.4?km³/yr of surface water, an expansion onto an additional 1.4 million hectares of rainfed land, and modifications in subnational patterns of food trade. This framework for evaluating scenarios describing sustainability-oriented water policies is readily applicable to other regions.     

Power and efficiency in production pillage games

A pillage game is a formal model of Hobbesian anarchy as a coalitional game. The technology of pillage is specified by a power function that determines the power of each coalition as a function of its members and their wealth. A coalition can despoil any other coalition less powerful than itself. The present paper studies the problem of achieving an efficient allocation of resources when the required reallocation changes the distribution of power. For example, land redistribution may increase total production, but may also deprive the original owners of the power they need to compel compensation. In this case the original owners would block the redistribution. Previous work on pillage games has focused on the stable set (von Neumann–Morgenstern solution) as a representation of a stable balance of power. However, the balance of power is typically too delicate to support all efficient allocations. The present paper shows that for a large class of power functions, a recently developed extension of the stable set, called the legitimate set, can be rich enough to support all efficient allocations.      

On the effects of capital mobility on local infrastructure policy and rent-seeking

This paper deals with the influence of capital mobility on local infrastructure policy and on rent-seeking activities of local interest groups. It employs a model where households differ with respect to their endowments with the immobile factor land. Local governments decide about the level of productive infrastructure in their jurisdiction. According to their land endowments, different households benefit to a different degree from infrastructure. This redistribution effect of local infrastructure gives households an incentive for rent-seeking. As this paper shows, capital mobility and fiscal competition between local governments have an influence on the equilibrium level of rent-seeking. Rent-seeking expenditures increase with the introduction of capital mobility in a broad class of cases.     

DEVELOPING A MULTI-SCALE MULTI-REGION INPUT–OUTPUT MODEL

Many efforts have recently been devoted to developing global multi-region input–output (GMRIO) models. Unfortunately, the scales of GMRIO models do not allow them to capture the heterogeneity of regions within a single country. Multi-scale models can provide more comprehensive analyses capable of capturing the interdependencies of the global economy while preserving regional differences. The primary objective of this research is to develop methods for integrating multi-region input–output data sets from multiple spatial scales into multi-scale multi-region input–output (MSMRIO) models. These methods result in models that may have unusual features such as non-square trade coefficient matrices and a mix of industry-by-industry and commodity-by-commodity technical coefficients. To demonstrate the feasibility of MSMRIO modelling, a Canada-centric model was developed. This model includes 47 countries and Canada's 13 subnational regions. A MSMRIO model provides a tool to analyse global issues with a more spatially detailed focus.     

Do new mayors bring fresh air? Some evidence of regulatory capture in China

Review of Economic Design - This paper provides evidence of regulatory capture in China’s environmental regulation by exploring the relationship between subnational leaders’ tenure and...     

A note on redistribution

A consequence of income redistribution may well be to make everyone (including lower-income groups to which redistribution takes place) worse off after a period of years. Possibly income redistribution might gain consent because of risk aversion. The paper also draws attention to the tendency for people to be more concerned about poverty close at hand rather than far away.     

On the Economics and the Politics of Environmental Protection

A bstract . TWO loci of discussion respecting national policies for environmental protection are synthesized. Most economic discussions are couched in terms of analytical measurements of the social benefits and costs of different policies. But most political science discussions are couched in terms of the procedural obstacles to implementation erected by special interest groups. The standard tool of marginal cost/benefit analysis is applied to reveal how the redistribution of real income among distinct special interest groups determines the extent to which those groups align themselves politically. Many of the apparent conflicts among policy objectives in the area of environmental protection, full employment , and an acceptable distribution of income , can be mitigated by means of a carefully designed program of selective law enforcement and tax-financed subsidies.