Local Public Goods Research Articles

Fragility of the provision of local public goods to private and collective risks

Smallholder agricultural systems, strongly dependent on water resources and investments in shared infrastructure, make a significant contribution to food security in developing countries. These communities are being increasingly integrated into the global economy and are exposed to new global climate-related risks that may affect their willingness to cooperate in community-level collective action problems. We performed field experiments on public goods with private and collective risks in 118 small-scale rice-producing communities in four countries. Our results indicate that increasing the integration of those communities with the broader economic system is associated with lower investments in public goods when facing collective risks. These findings indicate that local public good provision may be negatively affected by collective risks, especially in communities more integrated with the market economy.

Are local agreements on equalization grants possible? A bargaining model with quasi-linear local preferences on local public goods

The art. 13 of the Italian law n. 42/2009 theoretically allows for local negotiations between municipalities on the allocation of equalization funds. However, in the subsequent practice and legislation, such form of local negotiation has never been adopted.A question arises from the Italian experience: in the presence of a predetermined equalization scheme decided by the central government, are local agreements on equalization transfers possible?In this paper we show that, in the presence of quasi-linear local preferences on public goods, there is no space for alternative local agreements on the allocation of equalizing transfers in the presence of predetermined schemes decided by the central government. Our results suggest that similar practices, when allowed, are destined to have scarce success.We also show that, if the central government does not provide a predetermined scheme, local agreement on equalization funds are viable.

Valuing Public Goods More Generally: The Case of Infrastructure

We examine the relationship between local public goods, prices, wages, and population in an equilibrium inter-city model. Non-traded production, federal taxes, and imperfect mobility all affect how public goods (or “amenities” more broadly) should be valued from data. Reinterpreting the estimated effects of public infrastructure on prices and wages in Haughwout (2002), we find infrastructure over twice as valuable with our more general model. New estimates based on more years, cities, and data-sets indicate stronger wage and positive population effects of infrastructure. These imply higher values of infrastructure to firms, and also to households if moving costs are substantial.

新経済地理と課税競争

This paper investigates Tiebout's conjecture on the role of heterogeneity in tastes for local public goods in the context of income-tax competition and Helpman-type model of New Economic Geography (NEG, hereafter). We identify two symmetric regions that compete for capital, which is mobile instantaneously between regions and is combined with an immobile factor, land, to produce the housing service. Following the literature of tax competition, it is assumed that each local government spends the tax revenue for providing local public goods in its region. Workers are producing differentiated private goods that facilitate the agglomeration economy as in NEG literature. They choose to migrate to the preferable region in the long run. We assume that uniform distribution is carried out according to the degree of attachment to public goods. We show that agglomeration economies tend to appear when transportation costs are high, which is similar to the result of Helpman-type NEG model, while it is also shown that heterogeneity of preferences for public goods works as either centripetal or centrifugal force, depending on the parameters in simulations. That is, the heterogeneity of households might not work as the dispersion force such as immobile workers in Krugman-type NEG model. This result implies that many patterns might exist in population arrangement that Tiebout's conjecture asserts under the settings of income-tax competition and the agglomeration forces in private sectors.

The Intricacy of Adapting to Climate Change: Flood Protection as a Local Public Goods Game

We study adaptation to climate change in a federalist setting. To protect themselves against an increase in flood risk, regional governments choose among adaptation measures that vary with respect to their costs, the level of protection they offer, and the presence and nature of spillovers to neighboring regions. The central government can provide co-funding in response to specific proposals. If it has to deduce the vulnerability of regions by their actions, the resulting adaptation measures are too costly from a social point of view. The results show that adaptation cannot be expected to be efficient without specifically designed incentive schemes.

A City Is a Data Pool: Blockchains and the Crypto-City

Drawing on economic transaction cost theory, this paper explores how blockchain and distributed ledger technology could shift the smart city agenda by altering transaction costs with implications for the coordination of infrastructures and resources. Like the smart city the crypto city utilizes data informatics, but can be coordinated through distributed rather than centralized systems. The data infrastructure of the crypto city can enable civil society to run local public goods and services, and facilitate economic and social entrepreneurship.

El efecto de la competencia política sobre la provisión de bienes públicos locales en México

Political competition may have virtuous effects similar to the effect that economic competition has in markets. Using cross-sectional data on local elections in Mexico, we evaluate the effect of political competition on the provision of local public goods, controlling for socio-economic and demographic factors. Evidence suggests that political competition is positively related to the coverage of municipal public services, having a greater effect in those areas with the highest poverty and income inequality conditions.

Green Online vs Green Offline preferences on local public goods trade-offs and house prices

This paper focuses on the relationship between (i) house prices and (ii) local green public goods. The main objective of the paper is to analyse a specific house-pricing mechanism which reflects the utility of being Green Offline, i.e. having access to green areas, versus the utility derived from the ability to be Green Online. The focus will be on data from European Union countries, and in particular Germany. Our results show that on an aggregate level for the EU there appears to be a clear indication for an irrational house-pricing mechanism, ignoring the negative trade-off effect from Green Online and Green Offline public investments (goods and assets). Meanwhile, on an individual level, for the case of Germany, more detailed bounded rationality effects of fashion-driven supply on house pricing are observed, positively related to Green Online values but negatively related to high Green Offline preferences. In conclusion, we find that house prices throughout Europe do not reflect a rational social change in green preferences, but tend to irrationally overprice Green Online values, which may create instability on the local housing market in the long run.

Influence networks and public goods

We consider a model of local public goods in a random network context. The influence network determines (exogenously) who observes whom every period and comprises a wide array of options depending on the degree distribution and the in/out-degree correlations. We show that there exists a unique equilibrium level of public good provision and compare it with the efficient level. We derive further insights for this problem by performing a comparative statics analysis.

Decentralization of Corruption and Local Public Service Delivery in Nepal

Lack of transparency, accountability, and existence of elite capture, ambiguity etc. will lead to misallocation and misappropriation of available resources. These phenomena contribute directly or indirectly to corruption resulting to poor efficiency and effectiveness of service delivery. These cases exist at the local level as well during the practice of decentralized service provision, leading to degrade the quality of and people’s trust on local public services. As represented by petty corruption at local level it seems to be decentralization of corruption as well in the same direction of decentralization of authorities and funds from centre to local governments. This paper tries to examine the effect of these factors on the local public service delivery in developing countries like Nepal. The study finds the existence of elite capture and corruption leading to the dissatisfaction of local people due to inferior quality of local public goods and services. Using survey data, mixed method of analysis and descriptive tools, the study examines how these maladies are affecting the local service provision through the impact on the corruption equation by the increased monopoly power of local officials along with discretion in decision making and reduced accountability. It observes the various practice of corruption existing in the local bodies and people’s perception on the corruption and local public services in the sample villages. The paper concludes that- unless and until the proper policies and actions to tackle these maladies are adopted, no one can expect for the effective and efficient decentralized service provision in order to improve the quality of life of general people.

Agglomeration, Segregation, and Social Welfare in Group Formation Games

We consider a non cooperative game in which a continuum of heterogeneous individuals partition themselves into groups. A player's payoff depends on the group she chooses and the set of players who choose the same group as her.In the case of anonymous group externalities, we show that free mobility equilibria are socially optimal when group externalities vary logarithmically with community size. When they increase less (more) than logarithmically, the equilibrium partition exhibits excessive agglomeration (excessive fragmentation). In the case of nonanonymous group externalities, free mobility affects the size, but also the composition of groups. We characterize conditions under which free mobility equilibria are excessively or insufficiently segregated.When applied to local public goods economies, these results provide insights on the social welfare effect of free mobility as a function of the local public good technology, the income distribution, and the tax scheme.

Trade Shocks and the Provision of Local Public Goods

We analyze the impact of trade-induced income shocks on the size of local government and the provision of public services. Areas in the United States with declining labor demand and incomes due to increasing import competition from China experience relative declines in housing prices and business activity. Since local governments are disproportionately funded through property and sales taxation, declining property values and a decrease in economic activity translate into less revenue, which constrains the ability of local governments to provide public services. State and federal governments have limited ability to smooth local shocks, and the impact on the provision of public services is compounded when local income shocks are highly correlated with shocks in the rest of the state. The outcome is a relative decline not only in incomes but also in the quality of public services and amenities in trade exposed localities. (JEL F14, F16, H41, H71, R12, R31, R51)

Natural resources, rent dependence, and public goods provision in China: evidence from Shanxi’s county-level governments

This paper investigates how natural-resource endowments affect the provision of local public goods in China. According to fiscal sociology, due to the rentier effect, resource-rich local governments tend to have more state autonomy and are less responsive to society, resulting in poor governance. Moreover, due to political myopia, resource-abundant local governments tend to neglect the accumulation of human capital. Shanxi’s county-level governments are excellent samples to test these hypotheses. Statistical results show that resource-abundant local governments tend to spend less on social expenditures as well as specific education, social security and healthcare, and environmental protection expenditures. Meanwhile, coal-rich governments spend significantly more on self-serving administrative expenditures. The results suggest that negative impacts of natural resources on governmental fiscal extraction and expenditure behaviors are an important causal mechanism of the resource-curse hypothesis. To curb this problem, the current fiscal system needs to be reformed accordingly.

Identity and social exclusion: an experiment with Hispanic immigrants in the U.S.

In this study we conduct a lab-in-the-field experiment with low-income Hispanics in three neighborhoods in a large city in the U.S. to investigate how identity and social exclusion influences individual contributions to fund local public goods. We find that while the strength of identity has a significant and positive impact on individual contributions to local public goods, the perception of social exclusion significantly decreases contributions. Our findings thus suggest factors that may impede full civic participation, and shed important light on potential policies to increase integration of immigrants and ethnic minorities into mainstream society.

Efficiency and Sustainability of Local Public Goods and Services. Case Study for Romania

The aim of this paper is to evaluate the efficiency and sustainability of some local publicly-provided services (social, educational, public utilities). We have measured the Romanian local administrations expenditures’ efficiency in supplying public goods and services using the non-parametric model of data envelopment analysis. The appraisal of efficiency and sustainability is mandatory when studying the optimization of public sector costs born out of taxpayers’ money and the increase in the quantity and quality of supplied services. The services we have selected for this article cover many aspects of citizens’ life quality. We have processed data from 2011 for all 41 Romanian counties and the municipality of Bucharest. For each decision unit, we have established a technical score, either quantifying the efficiency of expenditures allocated for supplying a certain level of services or measuring results’ sustainability in terms of services rendered to local collectivities, considering a constant expenditure level. Based on the analyzed data, we have concluded that only 11 counties satisfy the required conditions. Furthermore, units registering a lower level of per capita expenditures have efficiency scores above the overall average, while counties with more citizens/taxpayers provided more public services compared to others.

Ethnic Diversity and Public Goods Provision

We revisit the claim that ethnic heterogeneity—the degree to which different ethnic groups make up the population—reduces local government spending on various public goods. Our analysis suggests that heterogeneity does not necessarily reduce local public spending due to two factors: (1) the low price elasticity of demand for local public goods and (2) the substitution between public goods. Using data from American cities and school districts from 2000 to 2010, we find that ethnic heterogeneity has offsetting positive and negative effects on various types of local government spending. Our findings imply that local governments respond to an increase in ethnic heterogeneity by rebalancing local public spending—for instance, adopting a policy that reallocates resources from roads to police and fire protection.

Political economy of debt and growth

A theory of endogenous fiscal policy and growth is developed. Fiscal policy–debt, income tax, spending on local public goods, and public investment–is determined through legislative bargaining. Economic growth depends directly on public investment, private investment in human capital, and, via learning-by-doing, labor supply. The model economy converges to a balanced growth path. During the transition to the balanced growth path, public debt grows faster than GDP, provisions of public goods and infrastructure grow slower than GDP, and the tax rate declines. The model is used to assess welfare implications of austerity programs.

Bargaining over local public good provision in nested social dilemmas: A comparative study of variation from South India

ABSTRACTIn rural India, decentralized government schemes and assembly constituency development programs represent major channels through which local public good provision is realized. This polycentric governance structure confronts local leaders with a distributional conflict, which is nested in a social dilemma situation. Based on a controlled case study approach, we investigate the provision of small-scale infrastructure in three South Indian communities. Apart from roads and drinking water facilities that directly appeal to the residents of a community, local leaders bargain over infrastructure contracts, which serve as patronage resources in interactions with politicians from higher government levels. A comparative game-theoretic analysis of the results suggests that coordination through political party identities has translated into alternative bargaining strategies and hence varying distributional outcomes regarding contracts and local public goods in the communities under review. The study concludes with recommendations for polycentric institutional design.

Subnational Variation in Electoral Accountability: Local Public Good Investments and Incumbent Support

Theories of democratic governance assume that citizens hold politicians accountable for their performance in providing public services. This study expands the existing debate by shifting its theoretical lens to subnational heterogeneity in satisfaction with government performance and incumbent support. Existing accounts suggest that local political and social contexts are likely to condition citizens’ perceptions of government performance. Since satisfaction with public services is driven not only by policy outcomes but also by the processes involved in decision making, the presence of stronger and denser voice and accountability mechanisms in small local units that increase citizens’ sense of the ability to influence local outcomes is likely to translate into higher satisfaction with government performance independent of the outcome itself. Using an original panel dataset containing detailed information on education and health investments and electoral outcomes in Turkey, I find that particularly health investments have a positive, yet delayed e↵ect on the vote share of the incumbent government. However, consistent with the theoretical expectations, this positive effect is limited only to small districts. A crucial contribution of this study is that the effect of public services on incumbent support is not uniform. By showing that local contexts may condition satisfaction with government performance, and thereby electoral outcomes, the study makes an important contribution to the literature on electoral behavior and distributive politics as well as governance and accountability.

The political economy of (De)centralization with complementary public goods

This paper provides a political economy analysis of (de)centralization when local public goods—with spillovers effects—can be substitutes or complements. Depending on the degree of complementarity between local public goods, median voters strategically delegate policy to either ‘conservative’ or to ‘liberal’ representatives under decentralized decision-making. In the first case, it accentuates the free-rider problem in public good provision, while it mitigates it in the second case. Under centralized decision-making, the process of strategic delegation results in either too low or too much public spending, with the outcome crucially depending on the sharing of the costs of local public spending relative to the size of the spillover effects. Hence, with a common financing rule, centralization is welfare improving if and only if both public good externalities and the degree of complementarity between local public goods are both relatively large.