Provision Of Local Public Goods Research Articles

Friends from Afar: Migration, Cultural Proximity and Primary Schooling in the Lower Yangzi, 1850-1949

This paper test the hypothesis that cultural distance between groups impedes local public goods provision. Using a unique historical dataset of surnames in the Lower Yangzi area of China, we are able to measure cultural distance between migrants and natives (MNCD) at a county-level. We exploit the quasi-exogenous mass migration following the Taiping Rebellion in the mid-19th century for variation in MNCD. Using a fully flexible difference-in-differences model, we find a one-standard-deviation increase in MNCD is associated with 29.7% decrease in primary school enrollment rates in the early 20th century given a structural change in the financing of primary schools. This finding is robust to the inclusion of a variety of controls and to various subsamples. In addition, our results survive the consideration of competing hypotheses including population diversity, migrant human capital, war destruction, age structure and missionary influence. We propose weakened decision-making power as a possible mechanism through which MNCD impedes public goods provision. This suggested mechanism is supported by the fact that only schools relying on the decision making of self-governed local communities are negatively affected in their enrollment. MNCD has no effect on schools established and financed by upper-level governments

How Can Low-Income Housing Avoid Becoming Slum? The Governance Approach in China

For both policy makers and academic researchers it is an important concern whether or not low-income housing will become slum. The central issue of slum in both developing countries and developed countries is the lack of some local public goods such as security and sanitation. Hence, we propose a governance approach that focuses on how to better provide local public goods. By studying two empirical cases of low-income communities in Chongqing, China, we found that the critical problem in their local governance is that they couldn’t afford property management company (PMC). We argue that the combination of homeowners association (HOA) and financial subsidy to property management fee can introduce competition among PMCs into their local governance, resulting in better provision of local public goods and, ultimately, helping them to stay away from slum.

The Governance of Low-Income Housing

This paper develops a theoretical framework for analyzing the governance of low-income housing in the city. We focus on the provision of local public goods as the central issue for the governance of low-income housing. Governmental intervention in various forms is discussed. Factors that affect the governance structure from the efficiency perspective and the equity perspective, respectively, are explored in our theoretical framework. We then apply it to the case of the Chinese city. In particular, we analyze the governance structures of several major types of low-income housing including public rental housing, affordable housing, private low-income housing, work unit compound and urban village.

Making Reform Work: Evidence from A Quasi-Natural Experiment in Rural China

Why are some reforms successfully adopted while others not? This paper addresses this question by exploiting the variation in the adoption of China’s “One-Issue-One-Meeting” reform. The reform initiated by the central government in 2000 encourages rural villages to voluntarily adopt a new governing procedure that can help to enhance local public goods provision. We explore the determinants of adoption by paying particular attention to heterogeneities in village characteristics. Using data from the 2005 China General Social Survey, we find that villages with a more homogenous population measured by lineage fractionalization and a higher average household income are more likely to participate in the reform program. Applying Generalized Spatial Two Stage Least Square estimation, we also discover a spatial spillover in the adoption of the reform: the chance of a village undertaking the reform increases when its neighboring villages also do so, and such effect is more pronounced if the neighboring village is economically better off, suggesting a potential learning mechanism underlying the neighborhood spillover.

Endogenizing leadership and tax competition: Externalities and public good provision

This paper analyzes the issue of leadership when two jurisdictions are engaged in tax competition and capital tax revenues are used to finance the provision of local public goods. For that purpose we consider a timing game between the two asymmetric jurisdictions. On the first stage jurisdictions decide to move early or late and on the second stage they choose their tax rates. If jurisdictions differ with respect to population sizes or with respect to preferences for public goods, the Subgame perfect equilibria (SPE) are the two sequential Stackelberg outcomes. If jurisdictions differ with respect to productivities or with respect to capital endowments, the SPE are (i) the two sequential Stackelberg outcomes, (ii) the simultaneous Nash outcome at which both jurisdictions move early or (iii) the single sequential Stackelberg outcome at which the more productive or capital-poorer jurisdiction leads. The differences between the SPE (i)–(iii) are explained with the help of the externalities caused by the jurisdictions' tax rates.

An Empirical Analysis on Yardstick Competition among Local Governments and Implications for Roles of e-Government in Efficient Provision of Local Public Goods

In this study, we analyze the efficiency of the equilibrium of yardstick competition among decentralized local governments and investigate its empirical significance by using Japanese prefecture-level data. The model included in the paper features incomplete contracts between a principal and an agent (i.e., residents and the local government, respectively). The model states that a local government attains accountability through the voting behavior of its residents in accordance with a yardstick comparison of their own locality with their neighboring localities. We find that local governments tend to under-supply local public goods; in addition, to improve the efficiency of the yardstick equilibrium, local governments must supply local public goods after considering regional disparities regarding residents' preference conditions and other factors. E-Government is a promising means of promoting information policy of local governments. Using an e-Government evaluation and an investigation of SNS use by local government, we indicate the effectiveness and the problems of Japanese e-Government.

Shared accountability and partial decentralization in local public good provision

Recent decentralization reforms in developing countries have often lead to the coexistence of multiple tiers of government in given policy areas, triggering new accountability issues. This paper provides a novel theoretical treatment of the efficiency consequences of such ‘partial expenditure decentralization.’ It develops a political agency model in which two levels of government are involved in the provision of a local public good, with voters imperfectly informed about each government's contribution to the public good. A central result of the model is that partial decentralization is desirable only if the benefits of vertical complementarity in public good provision outweigh the costs of reduced accountability, which result from detrimental vertical strategic interactions operating through the electoral process. Through variants of the model, the interplay between decentralization and democratization is analyzed. From a positive point of view, the model predicts a relationship between electoral incentives and equilibrium decentralization.

I Don't Care to Belong to Any Club That Will Have Me as a Member: Empirical Analysis of Municipal Mergers

The efficiencyof local public goods provision and the functioning of local democracy crucially depend on the size and number of local jurisdictions. This article empirically analyzes voluntary municipal mergers in Finland. Our main focus is on aspects that have been somewhat neglected in prior empirical work: whether local democracy considerations, representation and voter preferences are involved in shaping the resulting municipal structure. The main results imply that some municipalities are forced to merge due to fiscal pressure and have to trade off political power to be accepted by their partners. The study also finds that the median voter's distance from services matters, while population size does not. The latter, somewhat surprising, observation is possibly explained by existing municipal co-operation, which already exhausts potential economies of scale.

DUAL AND COMMON AGENCY ISSUES IN INTERNATIONAL JOINT VENTURES: EVIDENCE FROM CHINA

With the help of a theoretical model, we analyze the relation between rent sharing in an international equity joint venture (EJV) and local public goods provision. In our setting, the local government faces a commitment problem to provide public services ex post to the set-up of the firm. We show that, to overcome such a dual agency problem, the multinational enterprise leaves more rents to the local partner than in the first-best to provide stronger incentives for local public investment. We test the trade-off between local public goods and ownership shares across Chinese provinces to find support for our mechanism.

Information and Under-Provision of Local Public Goods

We present an electoral theory on the public provision of local public goods to an imperfectly informed electorate. We show that electoral incentives lead to the efficient provision of local public goods only if the electorate is not well informed. An informed electorate induces candidates to under-provide local public goods, deviating from socially optimal allocations in order to target funds only to specific constituencies. Information generates an efficiency loss.

On the Efficiency of Partial Information in Elections

We study the relation between the electorate's information about candidates' policy platforms during an election, and the subsequent provision of inefficient local public goods by the elected government. More information does not always lead to better outcomes. We show that the equilibrium outcome is efficient if voters are partially uninformed; whereas, if the electorate is very well informed, electoral competition leads candidates to provide inefficient local public goods in all equilibria.

The Role of Bribes in Rural Governance: The Case of India

Given that the phenomenon of capture of public programs by sections the population is rampant in developing countries, households can indulge in a strategy to improve their participating in public programs by bribing the suppliers of such programs. This is an important issue affecting both the supply of local public goods and the incidence of corruption. To the best of our knowledge there is no analysis of the impact of bribery on participating in a local public goods program, anywhere. Using a unique data set for rural India this paper addresses the question of whether households bribe elected officials responsible for assuring such supply to improve their access to local public goods. We find considerable evidence of such bribing. We also model the welfare effects of such bribing on groups of households as well as the impact of bribery on aggregate welfare. Several policy conclusions are advanced.

Traditional Governance, Citizen Engagement, and Local Public Goods: Evidence from Mexico

We study the governance of public good provision in poor communities in Oaxaca, Mexico. We estimate the effect of usos y costumbres —a form of participatory democracy prevalent in indigenous communities—on the provision of local public goods. Because governance is endogenous, we address selection effects by matching on municipal characteristics and long-term settlement patterns. Using a first-differences design we show that these municipalities increase access to electricity, sewerage, and education faster than communities ruled by political parties. We also show they are places of vibrant political participation, not authoritarian enclaves protecting the political monopoly of local bosses.

City Competition for the Creative Class

This paper explores the conditions under which decentralization and fiscal competition lead to a policy of subsidizing cultural activities. A theoretical analysis discusses these subsidies as a form of local public good provision which makes a city more attractive to highly educated individuals. The analysis shows that the incentive to provide the public good is particularly strong, if institutional restrictions prevent local governments from adjusting their tax structure. An empirical analysis considering the case of public theaters in Germany supports the view that public subsidies attract highly educated individuals and capitalize in the earnings of workers with basic education. Given institutional restrictions, the empirical effects suggest that local jurisdictions face a substantial fiscal incentive to subsidize cultural activities.

Electoral Competition and Local Government Responsiveness in Brazil

The empirical literature on the effects of competition on the supply of public goods shows controversial results at the local level. The main objective of this paper is to investigate this relationship in a federalist country (Brazil) where the political system places few barriers to the entry of competitors and local governments have the independence to establish their own public policy. We show that a higher effective number of candidates running for the executive branch increase the supply of local public goods (the number of student enrollments, teachers, and free immunizations).

City size and the demand for local public goods

This paper studies how size-induced cost differences in the provision of local public goods affect the efficient level of public spending. Since public goods are non-rival in consumption, the per-capita cost of a given level of public good provision is lower in more populous jurisdictions. We show that this cost advantage gives rise to a substitution of public for private consumption and specify conditions under which the efficient level of local public expenditures per capita rises with a jurisdiction's population size.

When Does Everyone Contribute in the Private Provision of Local Public Goods?

AbstractWhen does everyone genuinely contribute in the private provision of a local public good? We first introduce a monotonic condition to characterize the relationship between the structure of the network that underlie the noncooperative game of private provision of local public goods on the one hand, and the preferences of the agents on the other, showing that the monotonic condition is a sufficient and necessary condition of existence of a distributed Nash equilibrium (DNE) in which each agent exerts a positive amount of effort to provision of the public good (Theorem 1). We then study the number of equilibria, and, by using the monotonic condition, characterize the condition under which the DNE set is a singleton, a continuum, or null (Theorem 2). As it turns out, the structure of the network and the agents’ preferences jointly shape the effort profile in the provision of local public goods.

Collective Action Dilemmas in Condominium Management

Condominium residents are reluctant to join the management committees (MCs) and contribute to the management of local public goods because of free-riding problems. In studying a sample of condominiums in Taipei, it is found that some degree of outsourcing to third party managers (TPMs) is necessary when the scale of local public goods increases. However, higher management fees paid to TPMs are not directly related to higher utilities derived by the residents in the use of local public goods. When self-selectivity in the outsourcing decision is controlled, the results show that the efficiency in the provision of local public goods increases with the effort levels of the MC members. The MC members who adopt a hands-off approach by fully delegating the management responsibilities to TPMs deliver lower pay-offs in the provision of public goods.

Interjurisdictional Capitalization of a New Metro Line on Housing Values

Many governments continue constructing new subway lines with the goal of reducing congestion and pollution in large cities. Besides the potential global effects on reducing negative externalities in the city, there are some local positive effects in terms of lower commuting time and distance for residents living close to the subway stations. These benefits of the public transport services should capitalize totally or partially on housing prices. Most of the empirical work has estimated the effects on housing prices after the public transit infrastructure is operating and implicitly assumed homogeneous capitalization across jurisdictions. However, due to differences on local public goods provision and residents' characteristics across jurisdictions, two identical housing units located at the same distance to the nearest metro station but in different local markets would not necessarily have the same degree of capitalization.Using parametric and non-parametric methods and transaction data for Santiago, Chile, we estimate the anticipated capitalization of a new metro line across counties in the city. The results show significant anticipated effects, between 3.6% and 5.3%, and also large interjurisdictional differences in capitalization degrees, ranging between -6% and 40%.

Linking Regional Science and Urban Economics: Long-Run Interactions among Preferences for Amenities and Public Goods

The linked nature of long-term patterns of urban deconcentration and regional change (from rustbelt to sunbelt) is analyzed in a framework that emphasizes heterogeneous human preferences. The focus is on the important interactions that exist between local and regional amenities, whether exogenous or endogenous. The central thesis is that persistent exogenous amenity variation among regions provides an underlying pattern of regional growth and decline. However, inappropriate provision of local public goods in central cities is seen to lead both to non-optimally large levels of suburbanization and to rates of regional change that are also non-optimally large.