Level Of Public Goods Research Articles

Municipal efficiency spillovers in France

AbstractThis paper provides evidence of the role of efficiency spillovers between French municipalities assessed through four levels of municipal equipment. We investigate changes in municipal efficiency for both cities possessing a certain level of public goods and cities located closer to those hosting high-rank functions. Based on a cross-sectional database pertaining to French municipalities with over 3500 inhabitants in 2018, we develop a two-stage approach. In the first stage, we estimate municipal efficiency through a robust order-m approach, while in the second stage, we run a truncated bootstrapped regression to disentangle the effect of the distance of an observed municipality to each of the four equipment levels. Our results provide evidence of efficiency spillovers where the less-endowed municipalities benefit the most from higher efficiency due to their geographical proximity to larger equipment centers.

Understanding Spatial Agglomeration: Increasing Returns, Land, and Transportation Costs

Economic activities are concentrated on a small share of inhabitable land. In our view, this agglomeration is the outcome of a trade-off between increasing returns and transportation costs, which capitalizes into land rents. Our second baseline idea is that Tiebout-like sorting provides a general framework to handle a large array of problems in spatial economics. Cities have high housing prices because they are productive and offer high levels of amenities and public goods. Both production and amenity effects capitalize in the land rent at a particular location. Through the process of bidding for land, spatial sorting is the involuntary consequence of a myriad of individual decisions made by agents who pursue their own interests.

Pareto optimal provisions as outcomes of voluntary public good supply

It is shown that a large set of public good supply levels that arise in a Pareto optimal allocation can also be attained as public good provisions in the Nash equilibrium of a non-cooperative provision game. With a not very far-fetched assumption on agents’ preferences this result even holds for all Pareto supply levels.

Semi-flexible majority rules for public good provision

AbstractWe introduce semi-flexible majority rules for public good provision with private valuations. Such rules take the form of a two-stage, multiple-round voting mechanism where the output of the first stage is the default alternative for the second stage and the vote-share thresholds used in every round of binary voting (a) vary with the alternative on the table for a public-good level and (b) require a qualified majority for approving the alternative on the table by stopping the procedure. We show that these mechanisms implement the ex post utilitarian optimal public-good level, provided valuations can only be high or low. This public-good level is chosen after all potential socially optimal alternatives have been picked for a voting round. We explore ways to reduce the number of voting rounds and develop a compound mechanism when there are three or more valuation types.

The Myth of the “Triple Win”: Questioning the Impact of Immigration on Immigrants, Origin, and Destination Countries

Abstract David Leblang and Benjamin Helm's 2023 book, The Ties That Bind. Immigration and the Global Political Economy, provides evidence that state governance affects the levels of emigration as well as international migrants' choice of destination. States that provide higher levels of public goods generate fewer emigrants while states that provide access to citizenship and non-discrimination attract more immigrants. Leblang and Helms then show that migrants, having moved across borders, facilitate international capital flows, including remittances, foreign direct investment, and portfolio investment. These flows, in turn, reduce the number of future emigrants. Their presentation falls short by failing to acknowledge the adjustment costs that may arise because of the temporal and geographic imbalances in generating revenues to expand public goods in the host state to accommodate the new arrivals. Moreover, their policy recommendation for enlarging temporary labor migration programs fails to acknowledge longstanding criticisms of these plans because of their potential for worker exploitation and the tendency of temporary migrants to remain in the destination country.

Recommendations of the 15th Union Finance Commission: Expectations and Realities

The 15th Union Finance Commission (UFC) report, submitted in India in the middle of a global economic setback due to COVID-19, was a hope for sub-national governments to arrive at a favourable financial devolution mechanism. Even though few recommendations by 15th UFC looks promising, it is difficult to outrightly reject the possibilities of increasing fiscal imbalances. The retention of the proportion of shared tax devolution to states as used during 14th UFC and the use of (a) tax and fiscal effort, (b) 2011 census population figure and (c) total fertility rate as demographic performance, for distribution of shared tax across states may be helpful to reduce fiscal imbalances. However, the decline in the size of shared taxes of states due to (a) shrinking tax collection by the central government during current economic crisis and (b) assignment of additional burdens on states like (i) the contribution of states towards national defence and (ii) internal security, may result in vertical imbalance. There is a possibility of an increase in horizontal imbalance with the rise in the weightage of neutral (need based) criteria and decline in the weight of equity criterion due to the proportionate decline in the shares of poorer state through these two criteria. The fiscal imbalances are to be reduced to a minimum level to enable the country providing a common minimum level of public goods to its people. Since the weight of neutral criteria is implicit in equity and efficiency criteria, an optimum weight adjustment solution as suggested by Mahamallik and Sahu ((2015) , Artha Vijnana, 57(4), 301–320) may be helpful to reduce imbalances. JEL Code: H770

Transformation of Partnership Relations of the Transport Infrastructure Complex

The importance of economic and legal regulation of transport infrastructure by the state is due to the need to preserve and improve the quality of public goods. One of the most important components of the national economy is the railway transport infrastructure, which forms, first of all, the conditions for the functioning of the economy as a whole, as well as ensuring the level of public goods in accordance with the necessary dynamics of natural reproduction of labor resources. The situation at the current level and prospects of structural inflation caused by the macroeconomic role of the infrastructural complex of the economy is problematic at the moment. The basic theory of this study was the results of the Chicago School of Economics of Industrial Economics, which formed the basis for grouping goods and services on a private-public basis. Based on the analysis of scientific discussions on the essence of public goods, the provision on the need for state regulatory impacts on the infrastructure complex in the Russian Federation is given. The connection of infrastructure to economic growth and the quality of people's lives is shown. Based on the analysis of scientific discussions on the essence of public goods, the provision on the need for state regulatory impacts on the infrastructure complex in the Russian Federation is given. The connection of infrastructure to economic growth and the quality of people's lives is shown. The results of the research presented in the article summarize the author's ideas about the transformation of the relationship of the transport infrastructure complex with the main business partners, providing the required level of stability of the entire national economic complex on the basis of the sufficiency of the provision of transport services. The article formulates a scientific hypothesis about the prerequisites and essence of the transformation of partnerships in the infrastructure segment of the public goods market in the Russian Federation.

Does government spending efficiency improve fiscal sustainability?

We evaluate the impact of government spending efficiency on fiscal sustainability and fiscal reaction function coefficients for a panel of 35 OECD countries during the period of 2007–2020. To answer our research question, we first compute the magnitude of the responses of government revenues to changes in government spending as well as the coefficients of the cyclically adjusted primary balance as function of one-period lagged government debt. Next, we make use of so-called government spending efficiency scores, which efficiently indicate how governments can maintain their level of performance whilst using fewer inputs. Our results show that for the input efficiency scores obtained, countries’ fiscal balance and fiscal sustainability is directly improved by the use of less public resources, whilst maintaining the same level of output. In the cases of the output efficiency scores, the commitment of increased government outputs can lead to higher economic growth and the generation of additional government revenues, which also improves fiscal sustainability. Specifically, rationalising public expenditures without jeopardising the actual level of public goods and provision of services is a stronger determinant of fiscal sustainability, as well as for the improvement of the primary budget balance.

Constant Returns to Scale with Pollution Modeled as an Unpaid Factor

If pollution emissions enter a constant returns to scale production function, the additional output generated by this unpaid factor cannot be an equilibrium phenomenon. Private factors will engage in rent seeking without some form of rationing. Herein, we propose a shared rationing mechanism and investigate the efficiency implications in a setting of devolved decision making. General equilibrium derived optimal conditions show that taxing capital alone will not provide the revenue for efficient local public good levels. Suboptimal public goods provision then leads to inefficient environmental quality. Interestingly, larger shares of emission rents rationed to mobile capital result in environmental competition becoming more fierce. Conversely, when large shares of rent are captured by locally owned fixed-factors, competition for mobile capital is subdued.

Incentive pay for policy‐makers?

AbstractWe study how to efficiently motivate policy‐makers to solve political multitask problems. Political multitask problems typically have some outcomes that are difficult to measure. Moreover, there are conflicts among citizens about optimal policies and policy‐makers have the power to tax the citizens to invest in better outcomes for some tasks. We develop a political agency model with two tasks and only one measurable outcome. In such an environment, policy‐makers choose socially inefficient public good levels and expropriate minorities. A judicious combination of constitutional limits on taxation and incentive pay for policy‐makers is second‐best. Incentive pay is conditional on the public good level.

Democracy and public goods revisited: Local institutions, development, and access to water

Democracies are commonly thought to provide greater levels of public goods than autocracies. Given that many public goods are provided locally, higher levels of local democracy are further thought to result in better rates of provision in both autocratic and democratic systems. However, several studies have cast doubt on democratic superiority in public goods provision both nationally and locally. We re-examine these contested relationships, investigating a locally provisioned public good: access to basic water. To determine what, if any, effects democracy has on public goods provision, we analyse the effects of both national and local democratic institutions, in conjunction with economic development. In cross-national regression analyses, we examine a global sample of 140 states from 2000 to 2015, arriving at three findings. First, access to basic water varies little by national regime type once accounting for development. Second, the existence of local elections and the degree to which they are free and competitive are positively correlated with basic water access rates in poor states. Finally, the positive effects of local democracy on water access in poor states increase with democratic institutional longevity. The findings of this study suggest two necessary additions to future research. First, more nuance is needed in the study of public goods provision beyond resources or a theoretical rationale for increased provision related to national regime characteristics. Second, considering the conditional influences of local institutional characteristics, development metrics could help illustrate the complicated circumstances determining access to basic public goods.

The ratchet effect in social dilemmas

In this paper, we investigate whether dynamic incentive schemes lead to a ratchet effect in a social dilemma. We test whether subjects strategically restrict their contribution levels at the beginning of a cumulative public goods game in order to avoid high obligations in the future and how this affects efficiency. The incentive schemes prescribe that individual contributions have to be at least as high as, or strictly higher than, contributions in the previous period. We observe a substantial and statistically significant ratchet effect. Participants reduce their public good contribution levels at the beginning of the game, anticipating that higher contributions imply higher minimum contribution levels in the future, which increases the risk of being exploited by free-riders. While the dynamic incentive schemes lead to increasing contribution levels over the course of the game, this increase is not strong enough to compensate the efficiency losses at the beginning.

Ethnic Heterogeneity and Public Goods Provision

The level of public goods provided in a society is important not only because it contributes to social inclusion and strengthens a shared sense of citizenship, but also because it is a fundamental pre-condition for long term growth and development. Studying the determinants of public goods provision levels, hence, becomes an important exercise. The negative association between ethnic heterogeneity and public goods provision is one such robust empirical finding in political science and economics. Despite the abundance of scholarly work on the topic, the causal mechanisms offered in the literature do not pay attention to the political process involved. The rational choice approaches simply model the relationship as a voluntary contribution game. This paper addresses this gap by offering a theoretical mechanism based on a legislative bargaining framework. We also provide a discussion on a potential extension of the framework where ethnic groups are endogenous.

Public good agreements under the weakest‐link technology

AbstractWe analyze the formation of public good agreements under the weakest‐link technology. Whereas policy coordination is not necessary for symmetric players, it matters for asymmetric players; however, this fails in the absence of transfers. By contrast, with a transfer scheme, asymmetry may be an asset for cooperation. We characterize various types and degrees of asymmetry and relate them to the stability of self‐enforcing agreements. Asymmetric distributions of autarky public good provision levels (also representing asymmetric interests in cooperation) that are positively skewed tend to be conducive to the stability of agreements. We show that under such conditions, even a coalition including all players can be stable. However, asymmetries that foster stability (instability) tend to be associated with low (high) gains from cooperation.

Voluntary Participation in International Environmental Agreements and Authority Structures in a Federation

We examine how the voluntary participation decision in international environmental negotiations affects negotiation outcomes when every country is a federation. Each country consists of two autonomous regions: one is a polluter region and the other is a nonpolluter region. In the model, each country can freely decide whether to participate in a negotiation, which determines the abatement level of pollution (the level of public goods). The participation decision of a country and the negotiation (if the country decides to participate) are either conducted by the federal government of the country or are delegated to the regional government of the polluter region. We show that in combination with the voluntary participation decision, the endogenous choice of authority by the federal governments has a coordination-game property; that is, there are at least two equilibria and one equilibrium provides a higher welfare than the other.

Discussing the determinants of online budget transparency based on a spatial regression analysis of Croatian cities and municipalities: Do good neighbours make you better?

Taxpayers want to pay as little in taxes as possible to fund an adequate level of public goods and services in their local government, and so they need to keep their local incumbents accountable. Online local budget transparency (OLBT) facilitates this accountability, as it enables citizens to find information online about their local budgets that is timely, accurate, comprehensive and understandable. The aim of this article is to identify the most important determinants of OLBT for all 556 Croatian cities and municipalities from 2014 to 2017. Using a dynamic spatial lag Durbin model, the analysis explores the direct and indirect effects of potential determinants on OLBT. The main contribution is the pioneering use of a dynamic spatial lag Durbin model for researching local budget transparency determinants in a Central and Eastern European democracy. The results show that neighbours have an influence on OLBT but that direct effects dominate; that is, the major OLBT determinants come from within each city/municipality. Particularly important determinants are residents’ income, the local government’s wealth, the number of public employees in the city/municipality and the population size.

Public goods equilibria under closed- and open-list proportional representation

Building on past research, this paper develops a game theoretic model to study the provision of local public goods under closed- and open-list proportional representation (CLPR and OLPR). The core results suggest that, all thing equal, legislators will provide voters with higher levels of public goods in OLPR than in CLPR systems. However, two intervening variables condition the institutional comparison: the district magnitude and electoral volatility. Firstly, public goods effort increases as district magnitude increases in OLPR systems, while it tends to decrease as magnitude increases in CLPR systems. Indeed, when district magnitude is [Formula: see text], the two systems are often indistinguishable. Furthermore, the distinction between OLPR and CLPR weakens when electoral volatility is low, such that neither system generates high levels of public goods effort. In addition to their relevance for political economy, the paper’s results provide game theoretic foundations for a series of theoretical conjectures found in Carey and Shugart’s (1995) seminal study of electoral institutions and legislative personalism (Incentives to cultivate a personal vote: A rank-ordering of electoral formulas. Electoral Studies 1995; 14(4): 417–439).

The Ratchet Effect in Social Dilemmas

In this paper, we investigate whether dynamic incentive schemes lead to a ratchet effect in a social dilemma. We test whether subjects strategically restrict their contribution levels at the beginning of a cumulative public goods game in order to avoid high obligations in the future and how this affects efficiency. The incentive schemes prescribe that individual contributions have to be at least as high as, or strictly higher than, contributions in the previous period. We observe a substantial and statistically significant ratchet effect. Participants reduce their public good contribution levels at the beginning of the game, anticipating that higher contributions imply higher minimum contribution levels in the future, which increases the risk of being exploited by freeriders. While the dynamic incentive schemes lead to increasing contribution levels over the course of the game, this increase is not strong enough to compensate the efficiency losses at the beginning.

Farmland abandonment, public goods and the CAP in a marginal area of Italy

Land abandonment is affecting several areas of Europe, and the issue has since some years become a policy objective. The consequences of land abandonment are however difficult to assess as both agriculture and land abandonment are linked to socio-environmental public goods, but the relationship between public good provision and land use, as well as their societal value, are unclear and debated. Policy such as the Common Agricultural Policy affects land abandonment and public good provision in different ways, by providing income support and targeting the provision of environmental public goods.The objective of the paper is to assess the land use, public good levels and welfare deriving from agricultural production and from the provision of three selected PGs, in three alternative scenarios. In a reference scenario land use allocation is driven by the maximization of agricultural income; we then compare these results with a scenario where land use decisions maximize the societal welfare, hence including the value generated by the three, and with a scenario that simulates Measure 13 of the Rural Development Programme (payment for Areas Facing natural or other specific Constraints). The method used is a land allocation model calibrated for the hill and mountain area of the province of Bologna (Italy), in which the public goods societal values are the results of a choice experiments taken in the Emilia-Romagna region. The main results is that the societal optimum is reached through a substantial change in land allocation (e.g. a strong reduction in land abandonment and an increase in forest areas) and in the composition of the welfare (from private agricultural income toward public good benefits) with respect to the private optimum. Moreover, generic income support reduces land abandonment but also total welfare as it has negative effects through the reduction of carbon sequestration and increase in soil erosion. More targeted policies, that more explicitly connect support to public good provision, have better welfare effects.

Public Goods Equilibria Under Closed - and Open - List Proportional Representation

Building on past research, this paper develops a game theoretic model to study the provision of public goods under Closed- and Open-List Proportional Representation. The core results suggest that legislators will provide voters with higher levels of public goods in OLPR than in CLPR systems. However, two intervening variables condition the institutional comparison: the district magnitude and electoral volatility. Firstly, public goods effort increases with district magnitude in OLPR systems, but tends to decrease with district magnitude in CLPR systems. Indeed, when magnitude is M = 2, CLPR and OLPR are often indistinguishable. Furthermore, the distinction between the two systems will weaken when electoral volatility is low, since in such circumstances neither system generates high levels of public goods effort. In addition to their relevance for political-economy, the paper's results provide game theoretic foundations for a series of theoretical conjectures found in Carey and Shugart's (1995) seminal study of electoral institutions and legislative personalism.