Local Public Goods Research Articles

Water, Spillovers and Free Riding: Provision of Local Public Goods in a Spatial Network

In many low-income countries, local public goods are provided by non-governmental organizations and local communities, rather than by government. In rural Tanzania, more than 500 organizations install different technologies of water pumps which local communities are then responsible for maintaining. One third of pumps are non-functional, despite low access to clean water. I show evidence that communities free ride on their neighbors' pump maintenance investments, but also benefit from spillovers that reduce the cost of maintaining their own pump. When pump maintenance spillovers are large, maintenance decisions are strategic complements, but when spillovers are small, free riding effects dominate and maintenance decisions are strategic substitutes. I develop and estimate a spatial network model of communities' pump maintenance decisions to quantify the importance of free riding and maintenance spillovers on pump functionality and child outcomes, and to estimate the effects of two policies that have been proposed in Tanzania. The model estimates that: (i) water collection fees mitigate free riding -- if adopted universally, pump functionality rates would increase by 11 percentage points; (ii) pump technology standardization across communities reduces maintenance costs -- full coordination by installing organizations would increase pump functionality by 6 percentage points; (iii) increased pump functionality improves child survival and school attendance; (iv) school attendance improves more for girls, who are primarily responsible for water collection.

Elected MPs, Traditional Chiefs, and Local Public Goods: Evidence on the Role of Leaders in Co-Production From Rural Zambia

What types of leaders are effective in organizing public goods that require community contributions? In many settings, both citizens and state agencies provide financing, labor, and oversight of local projects. This article analyzes the effects of elected Members of Parliament (MPs) and hereditary chiefs in facilitating co-produced public goods in Zambia. MPs have electoral motivations to provide public goods but may not be well-positioned to organize community contributions. Chiefs lack electoral incentives but typically have long time horizons and local social connections. I analyze the effects of both types of leaders on the provision of co-produced public goods through a natural experiment. I take advantage of lapses in leadership following the deaths of leaders in office to show that chiefs have a significant effect on co-produced public goods but MPs do not. Auxiliary analysis suggests that chiefs’ effect on community contributions depends on the length of their time horizons.

Local Governments and Economic Freedom: A Test of the Leviathan Hypothesis

Geoffrey Brennan and James M. Buchanan, in their 1980 book The Power to Tax, hypothesize that “the potential for fiscal exploitation varies inversely with the number of competing governmental units in the inclusive territory.” This paper tests that theory at the local level using data for US metropolitan statistical areas (MSA). MSAs are constructed on the basis of commuting patterns and are meant to delineate the local economy. Because of their construction, MSAs typically contain several distinct and nonoverlapping political jurisdictions, each with the power to tax residents, mitigate local externalities, and provide local public goods. Following previous literature, we measure “competing governmental units” using the number of general-purpose local governments within an MSA, adjusted for land area and population. In contrast to previous work, which uses less comprehensive measures of “fiscal exploitation,” we test Brennan and Buchanan’s “Leviathan hypothesis” using various measures of MSA economic freedom, rather than more limited measures of spending or revenue, as our dependent variable. We find mixed evidence that the number of competing jurisdictions is positively associated with economic freedom. When examining the individual components of economic freedom, we find a positive and statistically significant relationship with labor market freedom but only a weak relationship with government spending or taxes. These results offer mixed support for the Leviathan hypothesis, though support strengthens when metro areas in the South are excluded.

Cities and Politics in the Developing World

The last 20 years have witnessed an impressive outpouring of comparative politics research examining urban politics in the developing world. This research advances our understanding of phenomena such as clientelism, law and order, and local public goods provision. Scholarship could be strengthened, however, through more careful attention to how the urban setting of this research affects the politics examined. This article proposes two distinct ways in which urban politics can be conceptualized: politics taking place in urban agglomerations, characterized by large, diverse populations settled at high densities; or politics taking place within the boundaries of city jurisdictions, possessing legal powers and responsibilities distinct from those at other tiers of government or in rural areas. Adopting either of these conceptualizations illuminates new avenues for empirical work, theoretical innovation, and improved measurement. This article also shows that recent scholarship has neglected important, and fundamentally political, topics such as urban political economy, land markets, and environmental harms. Engaging with these areas would allow political scientists to revisit classic questions regarding the institutional influences on economic growth, the politics of redistribution, and the determinants of collective action.

Paying to save the beach: effects of local finance decisions on coastal management

As sea level rises and storm frequency and severity increase, communities worldwide are investing in coastline management projects to maintain beach widths and dunes that support recreational amenities and mitigate storm risks. These projects are costly, and differences in property owners’ returns from maintaining wide beaches will influence community-level support for investment in shoreline defense. One way to account for these differences is by funding the project through a tax instrument that imposes the heaviest cost on residents who benefit most from beach nourishment. Some communities along the US east coast have adopted this approach. We use an agent-based model to evaluate how the imposition of project costs affects coastline management over the long-term. Charging higher tax rates on oceanfront properties reduces desired beach width among those owners but increases desired width for owners of inland properties. The aggregate impact on beach width depends on coastline shape and development patterns that determine the balance between these two groups, heterogeneity of beach width preferences and climate change beliefs, and levels of participation in local politics. Overall, requiring property owners who benefit most from beach nourishment to bear the highest cost results in wider beaches. The result suggests that delineating tax rates to account for unequal benefits of local public goods across taxpayers could facilitate local investment in climate change adaptation.

Neighbors' Income, Public Goods, and Well‐Being

How does neighbors' income affect individual well‐being? Our analysis is based on rich U.S. local data from the Behavioral Risk Factor Surveillance System, which contains information on where respondents live and their self‐reported well‐being. We find that the effect of neighbors' income on individuals' self‐reported well‐being varies with the size of the neighborhood included. In smaller areas such as ZIP codes, we find a positive relationship between median income and individuals' life satisfaction, whereas it is the opposite at the county, MSA, and state levels. We provide evidence that local public goods and local area characteristics such as unemployment, criminality, and poverty rates drive the association between satisfaction and neighbors' income at the ZIP code level. The neighbors' income effects are mainly concentrated among poorer individuals and are as large as one quarter of the effect of own income on self‐reported well‐being.

Can vouchers reduce elite capture of local development projects? Experimental evidence from the Solomon Islands

External financing of local public goods can potentially create ‘political resource curses' by reducing citizen oversight, exacerbating elite capture, and producing policy outcomes that are sub-optimal for the general population. This paper experimentally tests a novel mechanism that seeks to mitigate elite capture of local development projects. Control communities are provided with block grants to fund local public goods, while households in treatment communities are provided with vouchers that they may either contribute to a public good or redeem at a discount for a private capital good. We find that the use of vouchers as a mechanism for aid delivery increases community participation in local public decision-making, changes the nature of allocation outcomes, and improves community satisfaction with allocation outcomes.

Provision of local public goods in mixed income communities

Motivated by the success and wide implementation of the Mixed Income Housing model in the United States and other developed countries, we provide a spatial equilibrium model of jurisdiction formation to understand how jurisdictions composed of mixed-income communities provide local public goods. Individuals choose which local public good to attend on the basis of income, and there are individuals in the same location but with different income that choose different public goods at different distances. Importantly, there is an equilibrium where smaller jurisdictions are comprised of a higher proportion of poor individuals.

The spatial spillover effect of fiscal decentralization on local public provision: Mathematical application and empirical estimation

This paper examines the spillover effect of fiscal decentralization on the provision of local public goods. The paper's objectives are as follows. First, we seek to discuss whether fiscal decentralization can affect “Promotion Tournament Game” among local governments through spillover effect of local public goods supply. Second, we also examine the intrinsic mechanism of such decentralized spillover effect. Finally, we analyze, if the spillover effect is possible, how much influence of fiscal decentralization on local public provision from both expenditure and revenue perspectives. Our analysis is based on a user fee model. The panel data from 31 Chinese provinces for the period of 1994–2013 are estimated using the spatial econometric method. The results show that revenue decentralization is negatively related to the local public provision, which is consistent with the “Leviathan hypothesis”. However, expenditure decentralization leads to an increase in the local public provision, which statistically proves the fierce competition in “Promotion Tournament Game” among Chinese governments.

Organized crime and public spending: a panel data analysis

The aim of this paper is to investigate, empirically, what components of public spending imply a decreasing effect on organized crime and what components create opportunities for organized crime, discussing also the role of government efficiency. Using a panel data analysis, the results show a strikingly consistent pattern for the EU Member States. Organized crime mainly operates in the distribution of government spending for local public goods and public provision of private services. There is a decreasing effect on organized crime of the public expenditure devoted to education and social policy. Government efficiency in public spending is beneficial to limit the opportunities of the organized crime.

Changing Perspectives: Local and Global Cooperation in Presence of Income Inequalities

We investigate the role of endowment inequality in a local and global public goods setting with multiple group membership and examine the effect of temporal role reversal on cooperation decisions. Subjects can contribute to a global public good which benefits all subjects and two local public goods which benefit only subjects of either their own group or the group of the other endowment type. Endowment inequality per-se decreases contributions of subjects with a high endowment to the global good, but increases cooperation of subjects with a low endowment on their local public good, thereby aggravating income disparities. Exogenously induced role reversal for several periods affects cooperation behavior of subjects with a high endowment positively and induces them to contribute more to the global good. Cooperation in unequal environments thus appears to be more stable when all parties have experienced the public goods game from the disadvantageous perspective.

Efficient Capital Allocation in Public Good Networks

A social planner allocates heterogeneous capital, which determines agents' cost of providing local public goods. Given a capital allocation, agents choose equilibrium efforts. Using a first-order approximation, we uncover a tradeoff between allocating productive capital to central and periphery agents, as measured by Bonacich centralities. More productive capital is allocated to central agents if agents’ relative risk aversion is below one. Otherwise, it is allocated to the periphery. However, when the planner controls capital allocation and efforts, more productive capital is always allocated to more active agents.

Rethinking the Political Economy of Decentralization: How Elections and Parties Shape the Provision of Local Public Goods

As more and more of the world’s states devolve power and resources to sub-national governments, decentralization has emerged as one of the most important global trends of the new century. Yet, there is still no consensus as to the benefits of decentralization and how to design institutions that can realize these benefits. We investigate the political conditions under which the decentralization of authority will improve the delivery of public goods. Building off Oates’ “decentralization theorem” to include inter-jurisdictional spillovers, we develop a new theory suggesting that the interaction of democratic decentralization (the popular election of sub-national governments) and party centralization (the power of national party leaders over sub-national office-seekers) will produce the best service delivery outcomes. To test this argument empirically, we develop a new dataset of sub-national political institutions. Our analyses, which examine educational and health service delivery in 135 countries across thirty years, provide support for our theoretical expectations.

The discerning voter: Party–voter linkages and local distribution under multilevel governance

What shapes voters’ expectations of receiving private benefits and local public goods in developing world democracies? Models of instrumental voting suggest that voters’ expectations are shaped by co-partisanship; however, this work does not consider the calculations that voters make in multilevel systems where different types of goods are allocated by different tiers of government. In this article, I argue that voters condition their expectations of private benefits on co-partisan ties with the local leader, but only do so with respect to local public goods when the local leader is aligned with the state government that controls the allocation of pork barrel spending. I test my argument with a vignette experiment conducted in rural India that randomly assigns the partisan affiliation of real village politicians and find empirical support for the argument. I also find suggestive evidence of strategic voting in local elections towards leaders aligned with the ruling party.

The spatial effect of fiscal decentralization and factor market segmentation on environmental pollution

Externality is a form of market failure, and also a starting point for government intervention. Environmental quality, as local public goods, has a characteristic of regional spillover, thus the intervention of government is crucial. Fiscal policy is widely seen as an effective tool for environmental management. The existing literature about fiscal decentralization’s effect on environmental pollution did not consider about spatial correlation in factor market segmentation. To explore such decentralized effect through factor distortions, we develop a two-sector model on the constraint of pollution emissions and market segmentations, and conduct an empirical estimation using Chinese provincial panel data from 15 years. The results show that there is a big difference between expenditure and revenue decentralization on pollution, furthermore, market segmentation exacerbated the environmental effects of fiscal decentralization and its positive role on environmental pollution is statistically more significant. Therefore, a better way out of pollution for policy making viewpoint is to adjust the decentralization structure and to break the productive factor market segmentation.

Going Along or Going Independent? A Dynamic Analysis of Nonprofit Alliances

Abstract This paper investigates strategic alliances in the nonprofit sector in the form of franchising. Using a dynamic model of local public goods with endogenous affiliation and splitting, we show that local organizations may choose to affiliate with the national organization for faster capital accumulation. Temporary alliance occurs when a local organization strategically affiliates with the national organization only to break away after accumulating enough capital. Alliance is more likely to arise and persist when the local chapter is smaller, when the local chapter’s mission is closer to the national organization’s, when the national organization is more efficient in production, and when the local chapter is more patient. Moreover, regulation that requires the local chapter to be affiliated with the national organization would be welfare reducing when the local chapter is large, when the local and national missions differ substantially, and when production at the national organization is inefficient.

Le théorème de la décentralisation s’applique-t-il aux collectivités locales françaises ? Un test empirique sur les compétences intercommunales

As a key component of territorial governance in Europe, intermunicipality offers municipalities the opportunity to exercise and collectively fund some local public goods or services. In accordance with the decentralisation theorem, the choice made by municipalities to transfer some competences to the intermunicipal level ought to be based on a trade-off between economies of size and the cost of spatial heterogeneity of citizens’ preferences. In order to empirically test this assertion, a probit model is estimated focusing on those French intermunicipalities with own fiscal powers, looking specifically at 10 various competences. Four main results are highlighted : (i) the heterogeneity of citizens’ preferences is holding back the transfer of competences from municipalities to the intermunicipal level ; (ii) economies of size and the need to coordinate local public choices predetermine certain competences to be exercised at intermunicipal level ; (iii) intermunicipalities made up of small municipalities are more likely to be entrusted with certain competences ; (iv) the decision to transfer competences to the intermunicipal level is influenced by the decisions made by neighbouring intermunicipalities.

Does Corruption Affect the Private Provision of Public Goods?

We present controlled experimental evidence on how corruption affects the private provision of public goods. Subjects in our experiment donate to non-profit associations. The associations provide local public goods that benefit all subjects. We compare average contributions between two conditions with the same efficiency: a corruption condition, where an administrator can expropriate part of contributions, and a control condition without corruption. Compared to the control condition, subjects matched to an expropriating administrator significantly reduce their contributions. Hence, contributors are less inclined to behave prosocially (i.e.~are more likely to free-ride) if they are exposed to corruption. We demonstrate that this effect works through a specific channel: corruption breaks the otherwise positive link between baseline preferences for cooperation and private contributions to public goods.

Subnational diversity in Sub-Saharan Africa: Insights from a new dataset

This paper presents a new dataset on subnational ethnolinguistic and religious diversity in Sub-Saharan Africa covering 36 countries and almost 400 first-level administrative units. We use population censuses and large-scale household surveys to compile detailed data on the ethnolinguistic composition of each region and match all reported ethnicities to Ethnologue, a comprehensive catalog of world languages. This matching allows us to standardize the notion of an ethnolinguistic group and account for relatedness between language pairs, a correlate of shared history and culture, when calculating diversity indices. Exploiting within-country variation provided by our new dataset, we find that local public goods provision, as reflected in metrics of education, health, and electricity access, is negatively related to ethnolinguistic diversity, but only if the underlying basic languages are first aggregated into larger families or if linguistic distances between groups are taken into consideration. In other words, only deep-rooted diversity, based on cleavages formed in the distant past, is strongly inversely associated with a range of regional development indicators. Furthermore, we show that subnational diversity has been remarkably persistent over the past two-three decades implying that population sorting in the short to medium run is unlikely to bias our main findings.

It’s Not Just Welfare: Racial Inequality and the Local Provision of Public Goods in the United States

Recent research shows that inequality between racial groups is a critical determinant of redistributive policy in the United States. Using various measures of local and state spending and examining multiple levels of geographical and political jurisdictions, we extend this research to government spending on local public goods. Specifically, we examine (1) whether the extent to which income inequality falls along racial lines dampens local and state government spending on public goods, (2) which types of public goods are most affected by the racial structure of inequality, and (3) whether political variables such as local leaders’ racial identities and party affiliation mediate the relationship between racial inequality and spending on public goods. The findings reaffirm the need to consider racial diversity and inequality jointly as influences on policy.