Local Infrastructure Investment Research Articles

Aid and conflict: Evidence from Chinese aid

Using data from AidData and the conflict report from Uppsala Conflict Data Program (UCDP) from 2000 to 2014, we find that China's other official flows (OOF) aid can significantly reduce the frequency of conflicts. To deal with the endogeneity, we use China's competitive capacity as the instrumental variable. Our results are robust when considering the possible sample selection bias and different types of international aid. We find that increasing the local infrastructure investment and employment is the main mechanism, which increases the opportunity cost of engaging in conflicts. Our results provide evidence on the effectiveness of China's aid mode and the importance of infrastructure investment in developing countries.

Reviving and Reorienting Growth after the Pandemic: The Role of Local Infrastructure Investments

As many countries are seeing the first signs of recovery from the COVID-19 pandemic, they are also shifting their policies from limiting the immediate economic impact of the pandemic on households and businesses to designing strategies that will revive long-term growth. Systemic challenges, such as climate change and growing inequality, are compounded by new ones because production and consumption patterns have been greatly modified by the pandemic, which has also led to major disruptions in global value chains. At the same time, the acceleration of the digital transformation is providing new opportunities for growth. A key success factor will be the capacity to restart and reorient infrastructure investments at a time when public finances have shifted from capital to current expenditure and private investments have been held back by the uncertain course of the pandemic. The focus of this paper is on the role that local government can play in promoting infrastructure investments and transforming the problems that the crisis has highlighted into opportunities for sustainable recovery and social inclusion. After an overview of the current infrastructure gaps and of the investment needs that the crisis has highlighted, the paper focuses on how to improve the enabling environment and the range of financial instruments that are available at subnational level. Local challenges are greater than those at national level because subnational authorities generally have more limited fiscal capacity and greater difficulty in attracting private investors. The paper also looks at specific experiences that can provide interesting insights on how to implement and finance infrastructure projects. Finally, it proposes a set of policy principles that could be taken into account to promote effective investments in local infrastructure.

Perceived Economic Impact of Religious Tourism: The Case of Zimbabwe

Purpose: The purpose of the study was to assess the perceived economic impact of religious tourism in Zimbabwe. The research objectives were (1) to determine the nature of religious tourism in Zimbabwe, (2) to determine the key success factor for economically viable religious tourism in Zimbabwe, (3) to ascertain the perceived economic contribution of religious tourism, and finally (4) to propose strategies for economically sustainable religious tourism in Zimbabwe. 
 Methods: The research adopted a qualitative approach and was descriptive in nature. The study focused on Harare and the study population was made up of a cross-section of tourism service providers in Harare, religious leaders, and the Zimbabwe Tourism Authority. Purposive sampling was used for service providers and as well as religious leaders. 
 Results: The research findings revealed that there are a lot of religious tourism activities that take place in Zimbabwe, particularly Harare, and normally take the form of pilgrimages, religious conferencing, healing and deliverance nights, and worship. The perceived economic value derived includes employment creation for the locals, an increase in foreign currency generation, and an increase in sales revenue. The research findings also show that for religious tourism to be economically sustainable there is a need for government involvement, re-packaging of the product, and investment in local infrastructure. 
 Implications: Zimbabwe Tourism Authority and the private sector need to take the religious tourism market seriously and make deliberate efforts to harness this growing market.

Hands On! Part I: The Trilemma Facing the Federal Government During State and Local Budget Crises

The economic crisis that accompanied the COVID-19 pandemic has left state and local budgets in tatters, with revenue falling quickly while demands for public services increase. The federal government responded in a number of ways, but the public debate over what it should do if there is an acute fiscal crisis – a state or a large city on the edge of default – has been theoretically confused and ahistorical. This is no accident. The academic literature on state fiscal crises, while very impressive in many ways, is also somewhat confused. It focuses on two contrasting problems: the moral hazard that a federal bailout of an insolvent state government would create and the macroeconomic harm that a failure to bailout an insolvent state government would create. What these two branches of the literature agree on is that the federal government, for good or ill, has since the 1840s taken a “hands off” approach to acute state and local fiscal crises. This Article and a companion piece will show that federal government simply does not have a history of “hands off” approaches to state and local defaults. While bailouts have been rare, officials from all three branches of the federal governments have intervened repeatedly in state and local fiscal crises to aid creditors and preserve confidence in the municipal bond market. These interventions are part of a long-running federal policy of encouraging states and local governments to borrow money to build civic infrastructure. Concern for the municipal bond market has led the federal government into all sorts of otherwise hard-to-explain policies, from President Ulysses Grant threatening to send troops to Iowa in 1870 to make a small town pay its debts to the Supreme Court’s radical transformation of the doctrine of Swift v. Tyson. Federal policy has been inconsistent, toggling between policies aimed at different and incommensurable goals, even during a fiscal crisis, perhaps most famously when it offered loans to New York City after the famous “Ford to City: Drop Dead” headline suggested aid would not be forthcoming. Recognizing their real concern for the municipal bond market changes our understanding of what is at stake for federal policymakers when they respond to acute state and local budget crises. Federal officials face a “trilemma.” Whether they promote and/or enable bailouts, austerity, or defaults on municipal debt, federal officials can avoid two of these harms, but not three: (1) moral hazard for state budgets; (2) worsening recessions; (3) reducing future state and local infrastructure investment. The companion piece will suggest how federal officials can navigate this trilemma in the current crisis.

Suburbs or Skyscrapers? The Effect of China’s Leasing Market on Housing Decentralization

A key policy instrument fueling China’s rapid urban growth has been the urban land lease, which generates municipal revenue through the sale of land rights to developers. By linking local infrastructure investment to farmland development, the policy creates the potential for shifts in urban form. This paper examines the impact of China’s leasing policy on housing decentralization from 1990 to 2000, exploiting exogenous variation arising from a pilot phase and addressing potential selection bias with a matched difference-in-differences estimator. I find the land leasing policy resulted in a 19.1% decline in construction in the urban core and a 26.2% increase in peri-urban areas.

Municipal bonds as a means of accelerating local infrastructure investment

Even today, the 2007 financial crisis imposes negative impacts on the ability of local authorities to raise funds for capital investment, particularly for infrastructure. A fundamental need thus exists for municipalities and regional authorities worldwide to broaden their financial channels and explore flexible financial options. In the USA, municipal bonds represent the backbone of local public finance. Nearly three-quarters of core infrastructures in the USA are financed by municipal bonds, with about $400 billion in issuances every year. However, the municipal bond market is not a rose without thorns. This paper examines different successful and unsuccessful experiences of local authority bond implementations for infrastructure investment. The limitations and advantages of more widespread use of bond issuance as a financial tool for infrastructure investments in the USA are examined. Next, the paper discusses how the problem of risk hinders investment, particularly in infrastructure. Thereafter, the paper enquires whether the example of collective solutions can become the financial cornerstone for infrastructure investment in a discussion of other European approaches, in particular the Swedish case under the mantle of the Nordic Local Government Funding Agencies. After describing effective strategies for local authorities to apply bond tools for infrastructure investments, policy recommendations are discussed.

The Neighborhood Impacts of Local Infrastructure Investment: Evidence from Urban Mexico

This paper reports on the results of a large infrastructure investment experiment in which $68 million in spending was randomly allocated across a set of low-income urban neighborhoods in Mexico. We show that the program resulted in substantial improvements in access to infrastructure and increases in private investment in housing. While a pre-committed index of social capital did not improve, we find an apparent decrease in the incidence of personal assault and teen misbehavior in neighborhoods where investments were made. The program increased the aggregate real estate value in program neighborhoods by two dollars for every dollar invested. (JEL H76, O18, R23, R31, R53, Z13)

The effects of local infrastructure investment on crime

This paper examines how a nationwide infrastructure investment policy, implemented at the local level, impacted local crime rates. The policy, developed in the wake of the global recession of 2008–09, was designed to boost local economies through job creation. Using monthly figures from the more than 900 municipalities making up the Spanish region of Catalonia, the paper exploits spatial and temporal variations in the Spanish Ministry of Public Administration's random approval of local investment policies, to estimate their impact on both unemployment and crime. The combination of difference-in-differences and IV estimates makes it possible to assess both the size and timing of the policy's impact on the local labor market and on municipal-level crime rates. While the policy did little to palliate the effects of the economic recession in the long run, local public finances did experience a short-term boost, resulting in a temporary reduction in local unemployment rates (as required by the policy), as well as a significant drop in crime rates.

The Public Works Loan Board and the growth of the state in nineteenth‐century England

AbstractThe nineteenth‐century archive of the Public Works Loan Board (PWLB) has been overlooked by economic historians. Yet the archive reveals how the PWLB came to play a major part in the financing of new schools, water supplies and sewers in the 1870s. Ten thousand loan applications have been analysed to highlight the changing patterns of the PWLB's lending, while the 60 volumes of minutes indicate why the pattern changed. The analysis shows that in the 1870s there was a large rise in local infrastructure investment caused by the switch from permissive to compulsory public health and education legislation. At the same time, the PWLB became predominantly a low‐cost, rather than a market rate, lender. This change shows how MPs’ views developed as they became more sensitive to the impact of the local costs of parliamentary legislation. Overall, the activities of the PWLB illustrate the legislative and institutional changes that contributed significantly to the growth in the role and spending of the state.

REPORT FROM THE SCIENTIFIC CONFERENCE PT: "PROJECT OF IMPLEMENTATION OF LOCAL LONG-TERM BALLS IN OPEN HOUSE" WHICH WAS REACHED ON 31 AUGUST 2016 IN THE HEART OF WARSAW HIGH SCHOOL IN OTWOCK

On August 31st, 2016, a scientific conference entitled "Implementation of parallel local currency in Otwock District" was held in Otwock near Otwock. The main topic of discussion during this Conference was the methodological assumptions of various concepts and formulas for the implementation of the parallel local currency in local government units applicable in the Otwock District. After several years of implementation of this type of parallel currency there should be positive trends confirming the acceleration of growth of the local economy, including improvement of the labor market situation and increase of tax revenues of the budget of the Otwock District, which will translate into increased investment in local infrastructure and improvement of quality of public services provided. Increased expenditure on education and public sector institutions' offerings.

Local governance and the quality of local infrastructure: Evidence from village road projects in rural China

Research has shown that allowing local communities to elect their own leaders increases local infrastructure investment. However, much less is known about the effects of local governance reform on the quality of local infrastructure. This paper examines the effects of governance reform implemented in rural Chinese villages on the quality of village road projects. We conduct surveys in 101 rural villages and collect data related to the implementation of the reform over the last two decades. We also measure the quality of over 550 village road projects completed in these villages. Using fixed effects and instrumental variable estimation methods, we find that the implementation of village governance reform increases the quality of village road projects. We also find evidence supporting the following effect mechanisms: (1) village leaders become younger and more educated, (2) high quality road projects increase incumbent leaders' re-election chances, and (3) village residents participate more actively in the management and monitoring of village road projects.

Private Capital, Public Goods: Forest Plantations' Investment in Local Infrastructure and Social Services in Rural Tanzania

With the rapid expansion of private forest plantations worldwide, their impacts on local development are under scrutiny by NGOs and researchers alike. This study investigates the impacts of private forest plantations on local infrastructure and social services in rural Tanzania. We take a comparative approach involving households living in villages adjacent to private forest plantations and households in villages adjacent to a state-owned plantation. We use survey data from 338 households to analyze their perceptions about the impacts of the plantations on the number and quality of roads, bridges, and health centers, as well as on school enrolment and quality of education. We triangulate the results from a logistic regression model with observations of the size and quality of infrastructure and social services in the villages and with findings from focus group discussions. The results show that the private forest plantations have positively affected local infrastructure and social services in adjacent villages. The results suggest that large-scale private forest plantations can contribute to rural development in developing countries. We highlight the importance of taking into account the perceptions of various groups in society when assessing the sustainability of forestry investments and their impacts on local communities.

Local Governments as Subjects and Objects of EU Law

The European Union’s multi-level governance system allows for the involvement of a broad range of actors, including non-state actors and individuals, which have been excluded from traditional forms of international law. This book chapter focuses on a group of actors that, while central to the operation for the EU and its Member States, lacks legal status under EU law. Local governments remain firmly within the exclusive sphere of competence of the Member States, as underlined in the European Treaties, and therefore depend on national law for their place within the EU’s legal system. The idea that arrangements pertaining to local government are, and should, be outside the scope of EU law has gone largely unquestioned by EU legal scholars. Notwithstanding this legal vacuum, local governments are routinely affected by, and affect, EU law in their roles as public service providers and conduits for political participation. Some EU involvement pertaining to the service provision by local governments has been overwhelmingly positive, for example through investment in local infrastructure and development. The net effect on the democratic role of local governments is less clear. While some localities have been hugely successful at increasing their influence by bypassing the Member State and forging their own relationship with Europe, others have seen their domestic positions eroded through EU membership and centralization of democratic processes to the national level. The discrepancy between the legal and factual status of local governments under EU law can also be seen to contribute to the disconnect felt between EU citizens and the EU institutions, and raises important questions regarding the application of the subsidiarity principle within the EU and its ability to safeguard the rule of law.

Research capacity development in South African manganese mines to bridge exposure and neuropathologic outcomes

Manganese (Mn) is a common occupational exposure worldwide. Recent studies indicate clinical and imaging evidence of neurotoxicity in chronically exposed workers. The pathologic significance of these findings is unclear. South Africa produces over 80% of the world's Mn from mines from a desert region in the Northern Cape Province. An autopsy program at the National Institute for Occupational Health (NIOH) in South Africa has provided compensation to families for mining-related lung diseases for almost 100 years. Building on this, we implemented a brain autopsy program to investigate the feasibility of obtaining brains from South African Mn miners and non-exposed reference miners to investigate neuropathologic consequences of chronic Mn exposure. Employing an experienced occupational health nurse, we identified deceased miners within 100 square km of the Mn mines. The nurse was notified of any Mn (case) or other (reference) miner or ex-miner death by local medical practitioners, occupational health and mine physicians, and community members, and families were approached for consent to remove the brains in addition to the cardio-respiratory organs. Families of deceased miners who had an autopsy at the NIOH in Johannesburg were also approached. To confirm exposure in Mn miners, mean pallidal indices were compared between Mn miners and non-exposed reference miners. Sixty-eight potential brain donors were identified; we obtained consent from the families to remove 51 (75%). The mean autopsy interval was seven days. With optimized fixation methods, the tissue quality of the brains for gross and regular microscopic examination was excellent. Ex vivo MRI demonstrated increased pallidal index in Mn miners compared to reference miners. We conclude that obtaining brain tissue from deceased miners in South Africa is highly successful with only a modest investment in local infrastructure. Tissue quality was excellent and should be ideal to investigate the neuropathologic consequences of chronic occupational Mn exposure.

Successes and challenges in rural Zambia: An interdisciplinary effort in a pro‐vitamin A biofortified maize efficacy trial in preschool children

Food‐based approaches to increase access to and intake of vitamin A‐rich foods in developing countries show promise as sustainable strategies for combating vitamin A deficiency. Staple foods biofortified with vitamin A must not only prove efficacious, but also effective, by reaching and gaining acceptance by end‐users. A critical step in this process is the successful implementation and community acceptance of efficacy trial interventions. A retrospective examination of a 3‐month biofortified maize feeding trial in rural Zambian preschool children conducted by an international team of researchers was performed. Transcripts of community meetings and observations by the researchers suggest several important factors contributed to community acceptance and low drop‐out, including community input and on‐going sensitization, utilization of local resources, employment of subject's mothers and other community members, investment in local infrastructure and inclusion of a preschool program for the children. Additionally, the success of the trial required an interdisciplinary, integrated effort that included many players, from plant breeders and nutritionists, to teachers, healthcare workers and community leaders. Challenges that were encountered included communication, resource acquisition, anxiety about witchcraft or Satanism and timely staff reimbursement. (Support from HarvestPlus 8217)

Restructuring Indonesia's sub-national public debt: reform or reversion?

Borrowing can be an efficient way for sub-national governments to acquire capital assets, but it also carries risks of fiscal distress and insolvency for borrowers. To minimise these risks, many governments around the world have developed ex-post insolvency remedies, including, most importantly, debt-restructuring mechanisms. In an effort to resurrect borrowing for local infrastructure development, the Indonesian government has designed and begun to implement debt-restructuring programs for sub-national government and sub-national government-owned water supply company defaulters. These programs constitute a major effort to reform an important, long-neglected and problematic aspect of sub-national public finances in Indonesia. There are a number of potential difficulties with the design and execution of the reforms, however, which collectively do not inspire much optimism for rapid progress in reviving financial flows to the sub-national public sector. Still, even halting advances in debt restructuring can substantially increase local infrastructure investment in the long run.

An International Capital Budgeting Experiential Exercise

This article describes an experiential exercise that uses a brief simulation model intended to introduce undergraduate international finance students to the complexities in corporate investments in foreign countries. Use of the model requires one or preferably two class periods. Student learning goals include: (a) understanding how different patterns of deviations from purchasing power parity can alter an international capital investment's profitability in dollars, (b) evaluating the tradeoffs of different financing options under violations of interest rate parity, (c) promoting discussion of ethical considerations in international investments by asking the student to decide whether to engage in local infrastructure investments and facilitation payments, and (d) gain experience in foreign investing under uncertain conditions. This project was partially funded by a University of Montana School of Business Administration Summer Research Grant.

Tobacco Farmers and Tobacco Manufacturers: Implications for Tobacco Control in Tobacco-Growing Developing Countries

Assisting tobacco farmers to transition to non-tobacco alternatives is a key element of comprehensive tobacco control's end-game strategy and specifically required by the World Health Organization (WHO) Framework Convention for Tobacco Control (FCTC). We examine the historical relationship between tobacco manufacturers and tobacco farmers in the United States, where the duration of the relationship has been longest and use information obtained to inform possible end-game strategies for tobacco control advocates working with tobacco farmers in developing countries. Tobacco Documents obtained under the Master Settlement Agreement (MSA) provide evidence of conflicts between tobacco manufacturers and tobacco farmers. Findings support WHO FCTC articles aimed at helping developing country tobacco farmers adversely affected by tobacco control efforts and highlight difficulties in discouraging tobacco cultivation as long as it remains relatively profitable. We conclude that successful end-game strategies should take a long-term approach aimed at building alliances with tobacco farmers and at creating mechanisms for tobacco farmer investment in local infrastructure.

The impact of tax increment financing programs on local economic development

The Tax Increment Financing (TIF) method has achieved widespread popularity as a funding source to finance local infrastructure investments and improvements. However, little research has been conducted to evaluate the effectiveness of such programs. This study undertakes a regression analysis to examine the effects of the municipal adoption of TIF programs on local economic development. The empirical results suggest that the adoption of TIF programs has a significant positive effect on local employment.

Urban and regional economic impacts of transportation investment: A critical assessment and proposed methodology

Macro-level studies of the effect of transportation infrastructure investment on regional economic growth have shown positive relationships between the level of public investment and the rate of private capital formation, employment, and output growth. At a microlevel, however, it is not quite clear how to model and measure the effects of an additional investment in a transportation facility like a highway or rail link on local economic growth. This issue is further exacerbated by the fact that negative environmental externalities from infrastructure expansion are mainly experienced at the urban and regional level and thus strongly affect their economic well being. Given these realities, this paper examines the critical issues involved in analyzing the economic effects of local infrastructure investments and then proceeds to propose a model which shows analytically the impact of changes in accessibility, caused by infrastructure expansion, on location and output decisions, and on the use of labor by production firms.