Local Public Investment Research Articles

LOCAL FINANCES IN WESTERN BALKAN COUNTRIES: FOCUS ON OWN -SOURCE REVENUES AND CAPITAL INVESTMENTS

This study examines the fiscal dynamics of local governments’ finances in the Western Balkan countries, focusing on their own source revenues and capital investments, made from the municipalities. While spending for capital investment has increased in nominal terms, the share of municipal spending on capital investments has been downwardly unstable over the past 16 years. In addition to central government transfers, several significant factors contribute to the determination of municipal own-source revenues, including central and local public investment, current expenditures, and municipal development index. The study reveals that capital investment depends on its own source revenues or capital transfers from the central government, where local capital expenditure emerges as a robust determinant, exerting a stronger influence on municipal fiscal autonomy compared to central government investments. This finding underscores the importance of local capital expenditure in enhancing fiscal independence at the local level. This research emphasizes the need for a comprehensive understanding of investment allocation, development indicators, and promoting local revenue mobilization. The findings suggest that enhancing local fiscal autonomy requires a shift in policy focus towards stimulating local capital expenditure and prioritizing human development. By identifying the factors that influence municipal own-source revenues, this study provides valuable insights for local management in strengthening the financial capacities of local governments in the Western Balkan countries.

Public governance, public investment and regional economic growth: Evidence from Vietnam

The article provides evidence on the effect of local public governance on the impact of public investment on local and regional economic growth, using spatial and regional logic. The research uses the spatial Durbin model and produces a panel data set that was conducted on 63 provinces of Vietnam from 2006 to 2022. Based on the interaction between public governance and public investment, the main findings indicate that their interaction plays an important role in adjusting the effects of public investment and public governance on economic growth not only in the locality but also spillover to neighboring localities in both the short and long terms. It suggests that local public governance not only hampers the impact of local public investment on local economic growth but also has spillover effects on the growth of neighboring provinces or regions in Vietnam. Additionally, the results of detailed analysis of PCI component indicators show that many aspects of local public governance are hindering local economic growth but contributing to promoting neighboring localities economic growth. Or, it has no effect the locality but promote or hinder the regional economic growth. The findings in this study implies that authorities of localities need to be cautious when using resources to improve the various aspects of public governance when designing strategies to enhance the quality of local public governance. It also suggests that this spillover effect is a crucial factor in advocating for more redistributive fiscal policies and regional governance policies aimed at reducing economic disparities caused by territorial boundaries. Therefore, authorities should prioritize regional cooperation strategies in their decisions regarding public governance and public capital allocation.

A five-year case study analysis of USAID local governance programming and public investment spending in post-earthquake Haiti

In the aftermath of the 2010 Haiti earthquake, the central government operations were paralyzed, and municipal officials became even more important as they were more readily able to respond to their constituents’ needs during this time of crisis. The United States Agency for International Development’s (USAID) five-year post-earthquake Limyè ak Òganizasyon pou Kolektivite yo Ale Lwen (LOKAL+) program aimed to bolster the capacity of municipalities – beyond this disaster event – through revenue mobilization activities, within quake-affected and non-quake affected areas. The intended outcome of this effort was to improve local public service delivery throughout Haiti.Nearly all participating LOKAL+ municipalities experienced increased local revenue collection, particularly in property and business taxes, from 2012 through 2017. However, the impact of these increases on public investment spending was not evident even though this was a stated objective of the program. To evaluate whether public services improved in two of the nine LOKAL+ localities, due to USAID’s local revenue mobilization efforts, I employed a case study analysis using descriptive statistics, in-depth interviewing, and content analysis.The findings revealed modest public service improvements in one of the two case study sites. However, the political climate within which LOKAL+ was executed – mainly, the unlawful installation of interim executive agents throughout the country at the time – had an observed impact on the study’s findings. The implications of country-specific political economic realities on the timing of donor-led local governance efforts are underscored, as Haiti continues to navigate compounding political crises – including the assassination of the President in 2021 – since the end of the LOKAL+ program.

The effect of flood experience on public preferences for land preservation: evidence from referendum votes

In response to losses of open space, local open space referenda have become a popular means for land preservation in the U.S. This study is the first to empirically examine the relationship between flood experience and voter support for open space referenda. We collect data on open space referenda between 2001 to 2015 from the Trust for Public Land’s (TPL) LandVote database. Flood occurrence and damage data are derived from the Spatial Hazard Events and Losses Database for the United States (SHELDUS) database. Our findings suggest that voters become less supportive of subsequent open space ballot measures if their communities recently experienced a flood event. Our preferred specification indicates that a flood would decrease the odds of a ‘yes’ vote by about 7.5%. If we use flood damage data to measure disaster impacts, our results show that a 10% increase in flood damage is expected to decrease the odds of a ‘yes’ vote by about 6%. These findings are consistent with recent experimental research showing that disaster exposure has a negative effect on preferences for local public good investments.

Political Business Cycle in Local Governments in Transition and Developing Economies. Literature Review and Empirical Study for Poland

Theory of political business cycles in democratic systems indicates that politicians have an incentive to operate with different economic instruments to acquire voters or secure re-election. Such phenomena also take place on the local government level, with incumbents manipulating the scale of expenditures, investments, or the amount of debt raised before elections. In this article, we focus on the analysis of local government investment as it is one of the most flexible parts of the budget so there is a strong incentive to use it as an election support instrument. Based on the panel data for the three full electoral cycles in Poland, we check the existence of the relationship between investment budget sizes and the phase of the electoral cycle. The results of the analysis show that even as a single explanatory variable, the election cycle is a significant factor explaining the behaviour of local public investments. It causes fluctuations of local investments by over 20% around their average level. This confirms the existence of a strong political budget cycle in Polish local governments. As this also provides evidence of political rent seeking, our findings provide a general rationale for limiting the number of office terms for incumbents in local authorities.

Public Transportation Decision-Making: A Case Analysis of the Memphis Light Rail Corridor and Route Selection with Analytic Hierarchy Process

The Federal Transit Administration (FTA) New Starts process involves multiple criteria to assess funding eligibility for local public transit investments. In this article a multicriteria method–Analytic Hierarchy Process (AHP)—is used to assess light rail transit (LRT) corridor and route alternatives. Although the focus is on the current LRT corridor and route selection process in Memphis, Tennessee, the AHP-aided procedure is intended to facilitate the public transportation decision-making process generically, reflective of federal New Starts guidelines as well as local priorities and preferences. Each alternative corridor and route is assessed functionally with respect to site-specific ratings of the criteria and subcriteria in a unified framework. This framework contains the goal, participant groups, criteria, subcriteria, and alternatives as various elements of a public transportation decision process with relative influence on the outcome. The best corridor and route alignment alternative is identified by a composite score on the AHP ratio scale. Finally, with sensitivity analysis, it is shown how a change on the importance of the criteria or participant group priority influences the trade-offs among the criteria and the outcome. The article concludes with a retrospective, reflective discussion of the planning process as a whole.

Recomputation of Public Capital Based on PIM and the Effect on China Regional Economic Growth

This paper first reestimates the public capital stock of each China province from 1994 to 2019 by improving the computing method of the components of the perpetual inventory method (PIM). Then, it brings the public investment and public capital into the extended Cobb-Douglas production function and explores the mechanism of public investment affecting economic growth from the regional perspective. Furthermore, through the analysis of the Local Government Financing Vehicles (LGFVs) as the major investor of local public investment during the last two decades, This paper confirms the importance of complementary factors such as institutional innovation and effective management of the public infrastructure in making public investment an “effective catalyst for growth” (Kessides, 1993).

The constrained politics of local public investment under cooperative federalism

Abstract Public investment spending declined steadily in advanced economies during the last three decades. Germany is a case in point where the aggregate decline coincided with growing inequality in investments across districts. What explains the variation in local investment spending? We assembled a novel data set to investigate the effects of structural constraints and partisanship on German districts’ investment spending from 1995 to 2018. We find that the lack of fiscal and administrative capacity significantly influences local investment patterns. Yet, within these constraints, partisanship matters. Conservative politicians tend to prioritize public investment more than the left. This is especially the case when revenues from local taxes are low. As the fiscal conditions improve, left-wing politicians increase investment more strongly and hence the difference between the left and the right disappears. Our findings are indicative of how regional economic divergence can emerge even within cooperative federal systems and show that, even when decision-makers operate under various institutional and structural constraints, partisanship matters for how these actors allocate discretionary spending.

Decentralizing investment: Evidence from municipal organization after close elections

AbstractI use close municipal elections in a nonparametric regression discontinuity framework to study the organizational dimension of local public investment following a decentralization reform in Peru. National political organizations' mayors winning by very narrow margins approve and execute larger investments than those of other types of parties; they also choose structures, systems, and personnel more conducive to active investment, engage in beneficial contracting relationships with outside funding sources, and achieve more stable financial and social performance. Evidence on the consequential influence of national parties only after the decentralization reform, with their aggregate investment implications, is discussed.

Downward Power Consolidation and Public Investment: Theory and Evidence from China

What determines the dynamic patterns of local public investment in authoritarian countries? We analyze a unique dataset that matches public-private partnership (PPP) projects with Chinese mayors who served from 2010 to 2017, and document a robust tenure effect in public investment. Mayors decrease public investment over time during their tenure. We propose a theory of downward power consolidation for this tenure effect, and argue that mayors prioritize downward benefit distribution using PPP investment to consolidate power. We provide evidence for this hypothesis. Contract-level evidence shows that mayors allocate proportionally more investment to local firms, particularly local state-owned enterprises. Moreover, the tenure effect becomes more salient among mayors who lack local work experience or patronage connections with upper-level officials.

Foreign Direct Investment and Employment Growth in the States of Mexico: Competitiveness and Social Progress

Employment growth is a desirable outcome of Foreign Direct Investment (FDI) and the economic performance of regions. However, the evidence available for Mexico is inconclusive. This study aims to contribute to the literature by assessing the dynamic relation between FDI and employment in the states of Mexico, and investigating the conditioning role of social progress, local public investment and competitiveness. We employ Impulse Response Functions and variance decomposition, derived from a Panel Vector Autoregressive (PVAR) model. The results provide evidence on the nexus between employment growth and the different types of FDI. We confirm the dynamic interrelation is, at best, weak.

Fiskalna decentralizacija i lokalna politika javnih investicija u Republici Srbiji

This paper analyses the level of fiscal decentralization and structural characteristics of local public finances in Republic of Serbia with focus on local public investments. Share of central government expenditures in consolidated government spending of 83%, indicates relatively high degree of fiscal centralization. In spite of significant rise in local public revenues in the last decade public investments remained low - amounting to 1% of GDP, which is significantly below EU and Central and Eastern Europe average (1.4 and 1.5% GDP, respectively). Our results indicate large variation in relative size of public investments across LSGs. Most local public investments are focused on roads maintenance administrative infrastructure, while investments in environment and education are low. To tackle local disparities in terms of quality of local infrastructure and to foster economic convergence, development of planning and implementation capacities and introduction of systemic incentives for local public investments should be considered.

Local Public Investment Drivers in Peru

Around half of Peru’s public investment is made by local governments. Through the estimation of a dynamic panel data model for 1796 local governments between 2010 and 2018, we find that the most important drivers for local public investment are: (i) availability of funding sources, especially those associated to non-renewable natural resource revenues; (ii) variables associated with each local government’s capacity to plan, budget and execute public investment; and (iii) political budget cycle effects, especially during the year following local elections. Furthermore, we extend our analysis by differentiating between local governments with reelected and non-reelected authorities, and by grouping local governments according to their economic size. Most of our results are shown to be robust across different specifications. Results from this paper can be used as a starting point to design mechanisms that make public investment more stable and predictable in a context where reelection banning can further deepen public investment’s fall.

Intergovernmental transfer under heterogeneous accountabilities: The effects of the 2006 Chinese Education Finance Reform

While intergovernmental transfers are widely used in improving local education, how local governments in non-democracies allocate fiscal transfers, given they are not electorally accountable, remains unclear. We study the impacts of the 2006 Chinese Education Finance Reform, one of the world’s largest education transfer grants, on public school spending. By comparing 1600 Chinese counties that were treated differently in timing and matching ratios, we show natural experimental evidence on how heterogeneous top-down and bottom-up accountabilities affect the allocation of transfer grants. On average, intergovernmental transfers did not increase the total spending levels of local public schools. The causal mechanism is that the transfers crowded out preexisting local public education investments in extra-budgetary accounts that were not scrutinized and audited by upper-level governments. Heterogeneity analyses further demonstrate that the policy only improved public school spending in counties where public employees had greater means of holding local governments accountable.

The role of Provincial Government Spending Composition in growth and convergence in China

China’s development policy since 1978 has differed across regions. With rapid aggregate growth has come widening regional inequality. The fiscal decentralisation reforms in 1994 shifted political pressure onto provincial officials to boost local growth through local public investments. These investments affect regional convergence by counteracting regulatory frictions in factor accumulation, and can also determine steady-state growth. However, the effect of public spending allocations across physical and human capital on growth and convergence processes is empirically unexplored for Chinese provinces. We take provincial time-series data on public spending by category, finding local public spending and its components augment convergence rates differently across regions. Spending on education and health contributes significantly more to growth and convergence than capital spending, confirming that the public capital-spending bias is not a local growth-optimising strategy. We suggest a policy of aligning local government promotion incentives to human capital targets to correct local resource misallocation.

Land financialisation and the financing of urban development in China

There is a growing body of literature on China’s land reform, land system and land-centred urbanisation. While the contribution of land proceeds to Chinese local public finance and infrastructure investment has been widely acknowledged, few studies examine land through the perspective of financialisation, namely how land development uses financial instruments to generate development finance. The process of land-driven financialisation in China has not been well understood. This paper examines the land mortgage, which has accelerated since 2008, and subsequent waves of financialisation through local government financial vehicles (LGFVs) and Chengtou Bonds (urban construction and investment bonds). We highlight that the adoption of a fiscal stimulus package triggered land financialisation, which started as a development strategy for crisis management in China.

Policy in the Pipeline: Identifying Regional Public Investment Priorities Using a Natural Experiment

We identify regional public investment priorities by studying the development of the water pipe system in the largest district in Poland. For this purpose, we take advantage of a major administrative re-form, implemented on 1 January 1999, which substantially changed the structure of Polish local government and reduced the number of top-tier administrative regions from 49 to 16. We treat the reform as a natural experiment, and apply the difference-in-differences approach to study developments along the boundary of the new Mazovian voivodeship. We find strong and positive implications for the development of the water pipe system in municipalities within the Mazovian voivodeship compared with those just outside its boundaries. The overall post-reform difference in the length of the total water pipe network is 25% and the difference in the per-capita length of the network is 30%. Local public investment priorities at the voivodeship level, potentially related to effective use of EU funds, are the most likely determinants of these differences.

The Persistent Effects of Place-Based Policy: Evidence from the West-German Zonenrandgebiet

Using a natural experiment, we show that temporary place-based subsidies generate persistent effects on economic density. The spatial regression discontinuity design controls for continuous local agglomeration externalities, so we attribute an important role to capital formation in explaining persistent spatial patterns of economic activity. This persistence is driven by higher local public investment levels, which local governments could maintain after the end of the program because of a persistently higher tax base. We also find evidence for significant local relocation of economic activity, which raises doubts that the net effect of the policy is positive. Finally, we show that transfers have capitalized in land rents such that pretreatment landowners have benefited from the program. (JEL H71, H76, O18, R11, R12, R51, R58)

INFORMAL INSTITUTIONS AND LOCAL PUBLIC INVESTMENTS IN RURAL CHINA

In this paper, we empirically investigate the impact of informal institutions on local public investment in rural China. We find that lineage groups have a significant effect on local public investment (per capita investment in irrigation, schools, roads, etc.): One clan is good for local public goods investment, while two or more clans in a village have a negative effect. The effect is increasing with the coverage of the largest clan. The evidence on religious groups is mixed.

Prevalência de enteroparasitos em moradores da cidade de Cáceres/MT

Dentre os diversos problemas que assolam a saúde pública no Brasil, o enteroparasitismo se mostra como um dos mais sérios, apresentando forte correlação com aspectos de desnutrição das populações, podendo afetar o desenvolvimento físico, psicossomático e social das pessoas. A transmissão desses parasitas está relacionada com as condições de vida e higiene das comunidades, ocorrendo alta prevalência em populações de baixo nível socioeconômico, geralmente desprovidas de infraestrutura sanitária mínima. Os estudos sobre parasitos intestinais no Brasil são fragmentados e para o estado de Mato Grosso, especialmente o município de Cáceres, são raros. Assim este estudo objetivou diagnosticar a prevalência de parasitos intestinais na população acima de cinco anos de idade, em dois bairros periféricos no município de Cáceres/MT, um dos 100 municípios mais pobres do país. Entre janeiro e abril de 2013, coletores estéreis descartáveis foram distribuídos nas residências e recolhidos no dia seguinte e as amostras submetidas aos exames coprológicos, empregando a técnica de sedimentação espontânea. Os resultados foram analisados quanto às prevalências dos enteroparasitos em crianças e adultos. Do total das amostras analisadas, 74,86% foram positivas para algum tipo de parasito. O número médio de espécies presentes por amostra foi de 1,69 parasitos sendo registrado poliparasitismo em 26,78% das amostras. O índice de prevalência de enteroparasitos foram considerados altos, diante das médias nacionais e internacionais, havendo predominância de ocorrência de protozoários, revelando a necessidade de maiores investimentos públicos locais.