Levels Of Goods Research Articles

Endogenous Enfranchisement When Groups’ Preferences Conflict

In their seminal paper, Aumann, Kurz, and Neyman found the surprising result that the choice of levels of public goods in a democracy is not affected by the distribution of voting rights. This implies that groups of individuals may not value the franchise. This conclusion, however, does not correspond to what we commonly observe. We propose a new model to address the question of enfranchisement. The main feature of our model is that it takes into account natural affinities, such as religion or class, that may exist between voters. This allows us to show that while individuals may not value the vote, they nonetheless value the franchise. We also show that in the presence of nonconvexities, it is more likely that the group in power will grant the franchise when preferences are severely opposed.

Reforming Budgetary Language

In the context of several examples of problems associated with present budgetary conventions, I revisit Musgrave's conceptual division of the government's program into Allocation, Distribution and Stabilization Branch subbudgets. I suggest progress towards Musgrave's ideal of a more informative budgetary language, one less dependent on arbitrary institutional labeling, must be based on the nonarbitrary description of the individual's economic environment, as it is affected by government. As a first approximation, that environment can be summed up in terms of the individual's budget constraint and levels of public goods provided. Simple models suggest that an unambiguous budgetary language may be feasible but there remains much to clarify about both the objectives of the exercise and the specifics of methods to deal with particular problems.

Productivity, electricity, science: powering a green future

Science and technology offer the opportunity for environmental and social improvement, while providing the higher levels of services and goods that people seek. Notwithstanding efficiency gains, markets for electricity will grow because of the multiplication of population and devices and the deeper penetration of the transport sector.

Trade as an Engine of Political Change: A Parable

If efficient economic activity requires appropriate public goods, then changes in the volume and flow of trade will induce changes in the demand for these public goods. In general, if people disagree over their preferred levels of public goods, the expansion of trade may affect the structure of jurisdictions responsible for their provision. This paper presents a simple example meant to illustrate the general principle. It studies a general equilibrium model where the size of the market is easily parametrized and welfare depends on private exchange and two public goods. Preferences over one of them are heterogeneous, but administrative costs initially make the formation of two separate jurisdictions too expensive. However, as the market expands reliance on the public goods increases, and with it the importance of having access to the correct public good. A federal system becomes optimal when the market is

Voting with One's Feet.

I Introduction SEVERAL YEARS AGO, Charles M. Tiebout (1956, 418) hypothesized that: the consumer-voter may be viewed as picking that community which best satisfies his preference pattern for public goods the consumer-voter moves to that community whose local government best satisfies his set of preferences The process of expressing one's preferences for publicly provided goods and services is referred to as with one's feet. To the extent that inter-community differences in the levels of public goods and services [and taxes] are not capitalized into property values, there is an incentive to move [migrate] to the community with the greatest fiscal surplus. The hypothesis of voting with one's feet has been empirically investigated in a number of studies, including Cebula (1978; 1979), Cebula and Koch (1989), Chao and Renas (1976), Glantz (1974), Pack (1973), Renas (1980), and Sommers and Suits (1973). These studies investigate the impact of various state and local government policies, especially benefit levels, on the geographic mobility of consumer-voters. In all cases, attention is focused on consumer-voters in the United States who are classified as either white, black or nonwhite, or poor. The purpose of this study is to examine the Tiebout hypothesis in relation to a population group heretofore largely ignored in this literature: the American Indian. In particular, the impacts of geographic benefit differentials upon the location decision calculus of American Indian consumer-voters are examined. Hopefully, this analysis will shed light on such timely issues as the labor-market-efficiency effects of current policies and the need for reform. II Analysis THE CASE OF THE AMERICAN INDIAN is unique from that of other population groups in the United States in several respects. To begin with, relative to all other major population groups, the American Indian is very poorly endowed with human capital. Unemployment is extraordinarily high among this population group. Levitan and Miller (1993, 15) observe that the Bureau of Indian Affairs [BIA] . estimated that in January of 1991 the average unemployment rate on or near reservations was 45 percent. And they also note that While the BIA may overestimate unemployment, its methodology offers a better indicator of the economic condition on reservations than the BLS (Bureau of Labor Statistics). Given the extremely low level of human capital and the extremely high unemployment rates among American Indians, along with the, not surprisingly, very low per capita and median income levels within this population, of all major U.S. population groups American Indians may well be at the lowest rung of the economic ladder. It is not at all surprising that An inordinate proportion of reservation residents are therefore dependent on welfare (Levitan and Miller, 1993, 16). Many reservation residents receive support in the form of AFDC (Aid to Families with Dependent Children); however, they also receive support in the form of food stamps, the FDPIR (the Food Distribution Program on Indian Reservations), and the BIA's general assistance program (Levitan and Miller, 1993, 16-17). The economic significance of programs to the American Indian population is so great that, according to Levitan and Miller (1993, 17), . most reservation economies are more dependent on than employment as a source of income. Until comparatively recently, the American Indian population has been principally concentrated on reservations. In the 1950s, a major move by the federal government to encourage relocation off the reservations was initiated (Brophy and Averle, 1966; and Sorkin, 1971). Thus, the American Indian was being pushed into a labor market for which he was very poorly prepared and which was less than enthusiastically receptive to him. …

Content Protection, Resource Allocation, and Variable Labour Supply

A three-sector general equilibrium model is used to study the implications of an increase in content protection under the assumption of variable labor supply. The role of variable labor supply is highlighted in the paper. An increase in domestic content requirements increases the equilibrium labor supply, which magnifies the policy effects on the output levels (of agricultural, manufacturing, and intermediate goods) and the imports of foreign intermediates. Furthermore, the policy change may increase the national income of the economy while the national welfare is decreased.

SOME INEFFICIENCY IMPLICATIONS OF GENERATIONAL POLITICS AND EXCHANGE*

This paper explores the implications of generational selfishness in a model in which each generation has its own government. Such selfish generational governments will potentially distort the economy along a number of dimensions. One is the monopolization of factor supplies; another is the under‐ or overprovision of durable public goods. We demonstrate that selfish generations may place sizable marginal taxes on their factor supplies in order to monopolize their factor markets. We also show that selfish generations will provide inefficient levels of durable public goods both at the local and national levels. Finally, we demonstrate that generational inefficiencies can arise even in models of cooperative bargaining because of the first‐mover advantage of earlier generations.

A general equilibrium appraisal of energy policy in Mexico

This paper develops a static neoclassical general equilibrium model of the Mexican economy that focuses on production, consumption, and exports of energy goods. The specification of the model allows the government to set prices and production levels of energy goods exogenously. Domestic prices differ from international prices, and net exports of these goods are determined residually. The level of energy exports is a major factor in the determination of the government and trade deficits. The analysis presented in this paper serves as a case study of how to design and use an applied general equilibrium model to do policy analysis. An interesting feature is that the model itself is used to determine one of the key parameters, the elasticity of substitution of non-energy imports for domestic goods.

New research in local public finance: Introduction

The advantages of decentralized resource allocation mechanisms, long a central focus of the analysis of our private economy, has become a central issue to the study of our public economy as well. Beginning with the pathbreaking papers of Tiebout (1956) and Buchanan (1965), there has developed in the past twenty years an impressive literature examining the efficiency and equity implications of the decentralized, competitive provision of public goods, Given assumptions comparable to those usually required for efficiency in the provision of private goods, it has been shown [Bewley (1981)] that a decentralized economy involving goods with an ‘appropriate degree’ of publicness can provide those goods efficiently without the coordinating guidance of a central government. The required assumptions include: (1) utility-maximizing households who earn exogenous (i.e., endowment) incomes and who are fully informed regarding the quantity, quality and costs of public good production by any supplier; (2) suppliers who can purchase all inputs at competitive market prices and who provide public goods using a common technology which permits a minimum average cost for some finite and sufficiently small number of households; (3) costless relocation by households across suppliers; and (4) no production or consumption externalities across suppliers. In this stylized Tiebout-Buchanan economy, suppliers are local governments or community developers and households select their utility-maximizing levels of public and private goods by locating in their one preferred community. The final allocation gives each household its hreferred

The measurement of waste in a public goods economy

A small open economy model is developed to measure the waste of the whole economy when levels of public goods are determined by the government. The Allais–Debreu–Diewert measure of waste is defined and its second order approximation is calculated. This measure utilizes the second order substitution matrices of the restricted profit function and the restricted expenditure function evaluated at an equilibrium. Finally, simple examples and diagrams are utilized to clarify the economic implications of our approach.

On Voting Procedures for Decision‐making on Public Goods

ABSTRACTIf one accepts Samuelson's verdict that no decentralized pricing system can serve to determine optimally the levels of collective consumption, and that some other type of procedure or mechanism would have to be tried, two problems immediately arise. First, representation, i.e. the phenomenon that in all other existing mechanisms only a small fraction of the individuals involved can participate directly. The second problem is co‐ordination, due to the fact that parallel mechanisms have to be used for the allocation of private and public goods. Furthermore, if one would opt for some sort of voting procedure in order to determine the levels of public goods, the additional problem of incentive compatibility has to be coped with. The article aims to clarify the political relevance of these issues.

Efficiency in the Optimum Supply of Public Goods

WHEN THE GOVERNMENT'S production of public goods is financed by distortionary taxes, the conventional optimality rule of equality between the sum of marginal rates of substitution and the marginal rate of transformation (Samuelson [13]) has to be modified so as to take account of the excess-burden created by the means of finance. The importance of this modification has already been recognized by Pigou [10], and has recently been treated formally by Atkinson and Stern [1]. These authors have examined the question of whether the optimum output levels of public goods financed by distortionary taxation are larger or smaller than their levels in the full optimum with lump-sum taxation. One expects intuitively that with distortionary taxation the conventional rule will overestimate the net benefits of public goods, but it has been shown that dependence of private consumption, and hence of tax revenue, on the supply of public goods, may reverse the intuitive conclusion. In general, varying the supply of a public good will vary the demand for private goods (or the supply of factors), thereby varying government revenues. There is thus a fundamental interdependence between decisions about the relative quantities supplied of various public goods and the structure of taxation used to finance these goods. As a consequence, in general the marginal rate of substitution between two public goods is not equal at the optimum to their marginal rate of transformation (the ratio of producer prices). In this paper we are concerned with the following question: in an economy

The collective allocation of commodities in a democratic society: a generalization

Lovell, in a recent article in this journal, probed the properties of a majority rule equilibrium. His conclusions, although insightful, are dependent upon his assumptions about the utility function. If individuals have constant marginal utility of income, Lovell shows that resorting to the democratic process may lead to overproduction of publicly distributed goods. If preferences are characterized by a Cobb-Douglas utility function, all voters will prefer the same level of governmental services in a democratic setting; under private production, consumption would increase with income. Lovell also shows that if individuals have a CES utility function and if the elasticity of substitution between "public" and private goods is less than unity, then per capita consumption of the publicly provided good is less than what per capita consumption of that good would be, were it privately produced and sold. In this note, these and other conclusions are shown to be special cases of the more general conclusion that in a democracy richer residents will demand higher levels of collective goods than their poorer neighbors only if the income elasticity of demand for governmental services exceeds the elasticity of substitution between collective goods and privately consumed goods. If the income elasticity exceeds the elasticity of substitution, then under rather innocuous assumptions about the income distribution, resorting to public provision of goods can be shown to reduce the level of services provided. Thus, it is the relative size of the income elasticity and the elasticity of substitution that determine the characterization of majority rule. The model can be used to examine the impact of deductability provisions for local tax assessments, mergers, and revenue pooling on the allocation of governmental goods; the model can also provide a framework for predicting

The Role of Innovation in the Provision of Local Public Goods

The purpose of this paper is to extend the theory of clubs model of how jurisdictions select the level of local public goods to include innovation in their production and delivery systems. The results of the analysis indicate that cost-sharing rules influence not only the levels of public goods provided and the size of the community, but also the incentives to innovation. Moreover, the objective function implied by the theory of clubs behavioral model calls for innovational choices which are not Pareto efficient.

Maintenance and Reallocation of Green Belts and Urban Environments

1. Basic Viewpoint on the Maintenanace and Reallocation of Urban Environments(1) Concept of the Urban Environmental SystemAn urban environment with its organic relations of natural, social and economic facilities constitutes a system of its own. Consequently an urban environmental system should be defined not only by its ecological and natural conditions, but social and economic conditions, and its efficiency and safety should be guaranteed for the total of these conditions.(2) Analysis of Indicators of Urban EnvironmentsIn order to grasp the conditions of an urban environmental system, indicators of urban environments were set and their overall analysis was attempted. First, the situation of air pollution was analyzed by means of indicator plants, and the degrees of pollution were classified into several ranks for the analysis of local ecological conditions.Secondly, the socio-economic conditions centering around the supply conditions of public goods were compared between various localities (with a city, town, or village, as a unit of comparison) to examine the levels of distribution of public goods.Thirdly, the degree of urbanization and the distribution of the residual green belts in various localities were surveyed and analyzed.2. Classification of Green Environments(1) Evaluation and Classification of Urban EnvironmentsThe indicators of urban environments were observed, and their overall results were used to classify the environmental conditions in the areas within a radius of 50 kilometers from the center of the metropolitan zone.Urban areas with more than average levels of artificial environmental goods but with deteriorated conditions regarding green belts and ecological environment were found more often in the old urban area, while those areas with less than average levels of artificial environmental goods but with relatively good levels of green belts and ecological environment were frequently found in the rural areas outside the urban area. The newly developed urban areas between these two types of areas were found fraught with environmental difficulties because of inadequate methods of development. Their levels of artificial environmental goods were inadequate, and many of them faced such disruptions as rapid destruction of green belts and increasingly smaller segmentalization in the use of land. The congestion in urbanization was represented in these areas, which were urgently required to make overall solutions of the development of the urban environmental system.(2) Evaluation and Classification of Green EnvironmentsThe levels of green environmental goods in various localities were determined through the classification of the areas by the environmental indicators, and then the functions and distribution of the green environmental goods were examined.The green environments are largely classified into parks, farms and forests. The parks in the zone studied were generally limited in number, and their levels were far lower than those in the urban areas in the developed countries of the West. In the newly developed urban areas, farms and forests were destroyed, and their irregular developments interfered the proper progress of the land utilization. For the green areas in the zone between 30 and 50 kilometers from the metropolitan center, steps of conservation should be taken urgently in the orderly development and utilization of land.The development and distribution of urban parks and green areas are needed as the daily area of recreation for the urban inhabitants. Regarding the green belts for agriculture and forestry as found in the Tama highland range, Miura and Boso peninsulas, steps of preservation should be taken for the green belts connecting woods in old mansions, forests in Shrines, and green areas in river beds along with the development as the suburban agricultural areas.

Excise and Sales Taxes as Anti-inflationary Measures

Sales and excise taxes are in all likelihood typi cally shifted forward in the form of higher commodity prices. Their anti-inflationary influence arises from their effect in re ducing real purchasing power by raising commodity prices rela tive to factor incomes. Unlike other price increases, this type does not have a spiraling effect because it does not generate additional income. Sales and excises have some relative advan tage over income taxes so far as inflation control is concerned. They place a heavier relative burden on persons spending high percentages of their incomes and compel them to reduce con sumption. They give some incentive to spend less and save more. In addition some persons may tend to spend the same dollar sum, including tax elements, as before. If persons at tempt to maintain their old consumption levels of goods and services, they increase their tax liability by so doing. On the other hand, much of the greater anti-inflationary advantage of the sales and excise taxes will be lost if they generate wage increases. The sales and excise taxes may also offer some limited advantage from the standpoint of production incentives, but this can easily be exaggerated. The principal objections to the sales and excise taxes are equity ones; the levies conform much less closely with accepted standards of equity in taxation than the income tax. Sales and excise taxes, as well as the income tax, are greatly inferior to the expenditure tax as anti- inflationary measures, and the latter is more equitable than the commodity taxes.