Local Wealth Research Articles

Spreading manufacturing growth gains through local jobs: lessons from the Guatemalan highlands

The author describes the evolution of the garment‐manufacturing sector in the district of Totonicapán in the Guatemalan highlands, an area long associated with weaving and related skills. Producers have been shrewd in finding ways to take advantage of changes in the global economy, for instance by importing cheaper fabrics from Asia to reduce the cost of the final products. Producers have thus been able to exploit the domestic and regional market niche for lower‐cost garments than are available in the department stores, adapting their output to respond to fashions and trends. This adaptability has in turn generated more local employment and wealth among home‐based workers and village workers, as well as among townspeople and traders, and a high level of self‐employment. Paradoxically, a factor that has contributed to this situation—as opposed to becoming involved in maquila production—is that the failure of unions to organise the workers in the 1960s eventually brought about more equitable relations between the traditional elite and their former employees and a higher level of mutual dependence than exists in the maquila.

Collective Organizations versus Relative Performance Contracts: Inequality, Risk Sharing, and Moral Hazard

This paper studies collective economic organizations that share risk and mitigate moral hazard and compares them with relative performance contracts. Information-constrained optimal distributions of organizations and contracts are shown to be functions of the underlying primitives, in particular, the distribution of Pareto weights, and hence degree of inequality. Internal inequality of a potential, local group is a force for collective organization. That is, multi-agent organizations exist in order to extract wealth from some but not necessarily all members. The group organization is also shown to be information-constrained Pareto optimal at extremes of local wealth relative to an outsider. But the group organization is susceptible to both agents simultaneously deviating, colluding against the outsider, and this distortion makes an individualistic, relative performance contract an attractive alternative. More generally, organizations, contracts, and allocations are jointly determined. These implications could be distinguished in cross-sectional, time series data. Journal of Economic Literature Classification Numbers: D70, D82.

Harms and benefits from social imitation

We study the role of imitation within a model of economics with adaptive agents. The basic ingredients are those of the minority game. We add the possibility of local information exchange and imitation of the neighbour's strategy. Imitators should pay a fee to the imitated. Connected groups are formed, which act as if they were single players. Coherent spatial areas of rich and poor agents result, leading to the decrease of local social tensions. Size and stability of these areas depends on the parameters of the model. Global performance measured by the attendance volatility is optimised at certain value of the imitation probability. The social tensions are suppressed for large imitation probability, but due to the price paid by the imitators the requirements of high global effectivity and low social tensions are in conflict, as well as the requirements of low global and low local wealth differences.

Commercial Development at Rural and Small-Town Interstate Exits

Commercial development at 63 rural and small-town Interstate exits is quantified and related to local market wealth, size, geography, access, traffic, site competition, and other development. Five development types (gas stations, convenience stores, fast food restaurants, sit-down restaurants, and motels) are studied. The geographic information system TransCAD 3.0 is used to determine network access and local trade area characteristics. Models are then estimated for each development type using classification and regression techniques separately and in combination. Model estimates are then compared with actual development. Results show that the relationships are complex, often nonlinear; and show high correlation between development types. The findings should be useful for planning exit land use, coordinating market assessments, determining the value of land, and assessing sites for business placement.

Contingency in the Local Provision of Public Education

This paper examines the relationships between education spending and measures of wealth, absentee land ownership, and educational attainment in central and southern Appalachia. Drawing on advances in realist theory and methodology the paper develops a conceptual model and evaluates it using both extensive and intensive research strategies. The empirical analyses combine an extensive expansion‐method model of an 80‐county area with an intensive case study of a single county. In the extensive model, education spending is hypothesized a function of local wealth as contingently modified by varying levels of absentee land ownership and educational attainment. High levels of absentee land ownership have the effect of decreasing the degree to which a particular level of wealth translates into a particular level of education spending. Conversely, high levels of educational attainment have the effect of increasing the degree to which a particular level of wealth translates into education spending. The extensive model demonstrates that the wealth‐spending relationship is translated in a locally contingent fashion. In the case study, the contextual nature of these relationships is described in a single community, and the interactions of complex social processes are detailed. In addition to contributing to the literature on the geography of education spending in particular and the geography of social programs in general, the research demonstrates the utility of integrating extensive and intensive research methodologies employed through a realist theoretical framework.

Political Party Influence on Preschool Services in England, 1977–88

Pinch, in 1987, concluded that changing patterns of preschool services in England from 1977 to 1983 revealed a pattern of improvement in metropolitan areas dominated by the new left and cuts in Conservative-dominated shire counties. In this paper it is argued that Pinch's approach was too simplistic, because he did not differentiate between private and public services, took little account of other determinants of service change, and too readily grasped the influence of the new left as a determining factor. In this paper service change from 1977 to 1988 is assessed and it is found that, although there were political party effects on provision levels and provision change, these were reflected in different responses to local socioeconomic conditions. Provision in Conservative councils was notably affected by local wealth differences, whereas services in Labour areas appeared to be more responsive to female employment and local occupational structures.

State Reform in Education Finance: Territorial and Social Strategies

As of January 1991, state education finance systems had been overturned by the courts in twelve states and upheld by the courts in another fourteen. This article examines the ways in which states have responded to the challenge of equity in school finance. Equity reforms are rooted in two kinds of inequities in public elementary and secondary education. First, state governments can address interdistrict or territorial inequity that is due to the disparity in local taxable wealth. Second, state governments can address the social inequity that arises from the presence of special-needs populations within a district. A reform strategy is likely to reflect a state's relative emphases on territorial and social inequities. The common tendency, however, is to focus on territorial equity. These policy tendencies are shaped by various state political and institutional factors.

WHY REDISTRIBUTION DOESN'T WORK

In 1984, the Texas state legislature passed House Bill 72, which was meant, among other things, to make public school finance among school districts in the state more equitable. The legislation added a billion dollars to state educational funds and created redistributive mechanisms for allocating state aid. In spite of these significant efforts, finances among the districts are found not to have been substantially equalized. This article argues that the barrier to equalization lies in the division of educational funding between the state and the local districts, and the failure to dismantle the local reliance upon the property tax. Data are presented to demonstrate the tendency of wealthy school districts to increase local expenditures when confronted with redistributive programs at the state level. Further analysis indicates the persistence of local property wealth as the best single indicator of district expenditures.

Alternative Measures of Wealth Neutrality

During the last decade the search for a school finance system that reduces or eliminates the relationship between per pupil revenues for education and per pupil local property wealth has received special attention, in part due to the intervention of the judicial system.1 While the aims of the school finance reforms that took place during the 1970s are numerous, a recent review of these reforms characterizes the attention paid to low-wealth school districts as the key feature (Odden, 1978). Furthermore, the National Center for Education Statistics has been mandated by Congress to calculate state equity profiles that include an assessment of the relationship between educational revenues and wealth. Despite the focus on the relationship between revenues and local wealth, a single agreed-upon definition of this relationship has not emerged. In order to specify the particular group of definitions that is examined in this article, two distinctions need to be highlighted. First, the relationship between revenues and wealth can be formulated as either an ex post or ex ante concept (Barro, 1974; Feldstein, 1975; Friedman, 1977; Friedman & Wiseman, 1978; Gatti, Tashman, & Sweet, 1978; Berne & Stiefel, 1979). Ex post conceptions of the relationship are based on the actual patterns of revenues and local wealth that prevail in the school districts concerned. These actual patterns can be observed only after each district responds to the school finance plan and thus makes its spending decisions. Ex ante conceptions are based on the characteristics of a school finance plan rather than the actual spending that results from the plan. For example, the notion of yield for equal effort is a popular ex ante conception that can be assessed by examining a school finance plan without regard for the actual spending levels that each district chooses. While the measurement issues surrounding both ex post and ex ante conceptions deserve attention, this paper is more modest in its aims and will concentrate solely on ex post conceptions. A second distinction can be drawn to further specify the definitions of the ex post relationship to be examined in this article. This distinction revolves around the following question: Can the assessRobert Berne and Leanna Stiefel are Associate Professors of Public Administration and Economics, respectively, at the Graduate School of Public Administration, New York University. They contributed equally to the article and the names are listed alp abetically, by convention. Funds were provided by the Ford Foundation. We would like to thank Peter Stowe and several anonymous referees for their helpful comments on this paper, Chris Hakusa for his computer programming assistance, and Karen Gruhn for her secretarial assistance.

ACHIEVING PROPERTY TAX RELIEF WITH A MINIMUM DISRUPTION OF STATE PROGRAMS

The purpose of this paper is to propose a rational and systematic procedure for achieving property tax relief with minimum disruption in ongoing state programs. A pilot study was performed which applied linear programming techniques to an educational finance program to determine if property tax relief could be achieved with minimum disruption in state financial assistance to local school districts. The results obtained from applying the model to a junior college state support program indicate that with the same commitment in state funds, over two and one-half million dollars of property tax relief could be realized with no reduction in the state guaranteed minimum level of expenditure per ADA, commonly known as the foundation level. The foundation level, according to state mandate, represents the minimum school district expenditure required to insure an instructional program of adequate educational quality. In addition to maintaining the present foundation level, certain peripheral benefits associated with decreasing the dollar spreads in per pupil expenditures between school districts were also obtained by use of this technique. This latter benefit might be related to insuring financial equality of educational opportunity for all students in the state regardless of the local wealth of the school district.

New China and Old Macao

T HE LONG-ESTABLISHED PATERN of Sino-Portuguese coexistence in Macao has withstood the first shock of aggressive Chinese Communism and promises to survive as a unique phenomenon in international relations. Unlike other European enclaves in China, the Portuguese settlement at Macao was founded on the basis of cooperation rather than violence, and it is because of their continued willingness to cooperate today that the Portuguese are permitted to remain. The men who now control the colony's political life are pursuing a tradition as old as the colony itself in compromising with China's demands for a voice in Macao's affairs and a large measure of authority over the Chinese who comprise ninety-eight percent of the population. Because of China's virtual domination of the colony's economy, most of Macao's rich men have found it necessary to affiliate themselves with the Communists in order to save their commercial interests, and thousands of workers have had to join Communist unions in order to keep their jobs. Taking advantage of the local wealth at their disposal, the Communists are even challenging the Catholics for first place in the field of social welfare. The political influence exercised by the Communists is commensurate with their economic power, for they hold the strings of Macao's fattest purses. While the Portuguese administration continues to govern the colony much as it has always done, important and delicate questions are settled only after consultation with the Communist representatives. Galling as this situation is to many of Lisbon's civil servants, they are acutely aware of what, in view of the Communists' power, is or is not possible. Cooperation between the new China and ancient Macao is a policy laid down by the Chinese and accepted by the Portuguese. But this situation is much older than Chinese Communism. A mere speck on the southeast coast of China, this indefensible colony was for centuries prey to the whims of petty mandarins with insatiable appetites for squeeze, and the colony's policy towards China has long centered on the problem of appeasing these gentlemen at the least possible cost. The Macao Portuguese who have managed this policy, themselves not free from graft, learned at a very early date the importance of face and of patience in dealing with the Chinese, and far more than any other Europeans they succeeded in living in peace and harmony with the Middle Kingdom. No diplomacy could be so adroit, however, as to compensate for the extraordinary weakness of the