Consumption Of Public Goods Research Articles

Hodnota statku kolektivní spotřeby

The goal of this paper is to develop the theoretical framework of the public goods provision. This theoretic contribution is based on the critical analysis of mainstream economics theories dealing with public goods as market failure (neoclassical economics and neoliberalism) and on the results of own economic experiment examining the "free-riding" behaviour in the voluntary provision of public goods. The "free rider" problem is one of the main reasons for government intervention in the market. However, there is an inefficiency of public decision making on public provision and financing of selected goods because of the estimating goods values (ex-post consumer utility) problem. Moreover, the results of economic experiments do not support the pure "free rider" theory. However, the economic experiment simulates the real public good consumption that is why this paper contains also the survey of consumers' willingness to pay for specific public goods (public library services) in real terms based on the methodology of contingent valuation method.

Public Goods Provision, Redistribution and Capital Mobility

Two results follow from the standard workhorse model of tax competition. One is that tax competition between countries leads to underprovision of public consumption goods (see Zodrow and Mieszkowski 1986). The other that tax competition lowers capital taxes and may lead to less redistribution due to higher e¢ ciency costs of capital taxation. This paper embeds both public goods provision and redistribution in a single model framework, and shows that preferences for income redistribution may alter the standard result of under-provision of public goods under tax competition.

Political Animals Revisited

Political Animals Revisited

Boðhlaup kynslóðanna

Grein þessi fjallar um þróun einkaneyslu, samneyslu, þjóðar- og landsframleiðslu og eignir Íslendinga frá árinu 1870 og til vorra daga auk þess að spá líklegri þróun 50 ár fram í tímann. Í ljós kemur að því síðar sem fólk fæðist á þeim tíma sem skoðaður er þeim mun meiri verður neysla þeirra að jafnaði. Mjög mikill munur er á neyslu einstakra kynslóða framan af tímabilinu. Hann fer síðan minnkandi en er þó áfram talsverður. Þannig geta börn fædd árið 2010 vænst þess að samanlögð einkaneysla þeirra alla ævina verði um 22% meiri en foreldranna og samneysla 78% meiri. Bæði einkaneysla og samneysla hafa aukist verulega frá einni kynslóð til annarrar en þó samneysla hlutfallslega meira. Í greininni er jafnframt lagt mat á verðmæti íslenska hagkerfisins í ljósi framleiðslugetu þess og er niðurstaðan um 51.100 milljarðar árið 2011. Það er sextugföldun frá árinu 1870.

The Determinants of Welfare Spending in France: A Spatial Panel Econometric Approach

This paper produces spatial panel econometric estimates of the main determinants of the disparities in local welfare expenditures for the French mid sub-national jurisdiction level of Departments during the period spanning 1992-2008 and using a very rich dataset. In the standard local public good expenditures model where geography is traditionally absent, econometric estimations confirm the importance of socio-economic and demographic characteristics as main drivers of welfare expenditures (with tax price and income) but leave a large part unexplained due to relative localization. In the augmented model with spatial interactions, we find large expenditure interactions with a reaction function that slopes positively, when a department raises its expenditures by 5% while its neighbors increase theirs by 10%. We show that the classical expenditures function suffers from mis-specification with an upward biased income-elasticity. We obtain a robust elasticity divided by 3 compared to the base-case model, with a value passing from +0.6 to +0.2. Omitting geography thus leads to unduly attributing to income changes in expenditure stemming from local interactions. Finally, a significant flypaper effect is found in the data but whose magnitude is nearly halved when the spatial factor is controlled for. Possible explanations of our results are fiscal competition and/or political yardstick competition, with important implications for public policy, notably for the optimal design of equalization policies.

Political Agency Model of Persistent Electoral Success with Endogenous Rents

The paper presents a political agency model that observes how budgetary decisions on public good production affect the prospects of holding office for an incumbent political party. A simple budgetary function is broadened to include other expenditures such as public sector wages and social transfers so as to present a constraint to rent-extraction. Upon this a ratio of public goods to other expenditures is determined, which the party must keep within certain boundaries set by the voters. Rents are extracted from public good expenditures instead of being exogenously given as a part of a budget, as the party must be able to conceal rent-extraction due to constitutional boundaries. The incumbent’s decision on rents and public good production directly affects the state of the economy upon which the voters decide whether to re-elect the incumbent or not. Incumbents make their decisions based on observing the economic growth shock. For high levels of growth they decide to respect the voter re-election rule, while for low levels they will defect and extract maximum rents. In a repeated game setting an incumbent will always chose the optimal strategy with respect to the observed growth shock. This way, for high enough levels of economic growth an incumbent party may stay in office for an infinite amount of periods and keep maximizing rents with respect to the given constraints, without having to trade-off rents for holding office. The paper presents empirical evidence on United States gubernatorial and state legislature elections from 1992 to 2008 to evaluate the underlining theory.

Unspoken ethical issues in the climate affair: Insights from a theoretical analysis of negotiation mandates

Taking climate change as an example, this paper provides new insights on the optimal provision of a long-term public good within and across generations. We write the Bowen–Lindhal–Samuelson (BLS) conditions for the optimal provision of the public good in a world divided into N countries, with two periods, present and future, and we simultaneously determine the optimal response in the first and second periods for a given rate of pure time preference. However, the Negishi weights at second period cannot be determined unambiguously, even under a “no redistribution constraint” within each generation, because they depend on non-observable future incomes; and thus on the answers to two often-overlooked ethical questions: (i) Do rich countries agree on deals which recognize that developing countries may catch up with developed countries in the long run, or do they use their negotiating powers to preserve the current balance of power? And (ii) does each country consider only the welfare of its own future citizens (dynastic solidarity) or does it extend its concern to all future human beings (universal solidarity)? Answers to (i) and (ii)—critical in the debate about how to correct the market failures causing global warming—define four sets of Negishi weights and intertemporal welfare functions, which we interpret as four mandates that countries could give to the Chair of an international negotiation on climate change to find an optimal solution. We find that in all mandates, public good provision expenditures are decreasing functions of income at first period. But each mandate leads to a different allocation of expenditures at second period and to different optimal levels of public good provision at both first and second periods. Finally, we show that only one of these four mandates defines a space for viable compromises.

Brain-drain taxes for non-benevolent governments

This paper investigates the welfare effects of brain-drain taxes levied by non-benevolent governments, whereby a country collects a tax from skilled emigrants but potentially wastes a sizable portion of the revenue. Using a model in which taxes are chosen to maximize expected political rents, I show that the availability of a brain-drain tax increases a weighted sum of citizen utilities. However, the government's optimal brain-drain tax is found to be higher than the level that maximizes this weighted sum. In another model, a brain-drain tax is found to be desirable when governments use public good expenditures to compete for mobile residents.

THE OPTIMAL DIVISION OF GOVERNMENT EXPENDITURE BETWEEN PUBLIC GOODS AND TRANSFER PAYMENTS

This paper examines the optimal ratio of transfer payments to expenditure on public goods, for a given income tax rate. The transfer payment is then determined by the government's budget constraint. The optimal ratio of transfers to public good expenditure per person is expressed as a function of the ratio of the median to the arithmetic mean wage, and of the tax rate. Reductions in the skewness of the wage rate distribution are associated with reductions in transfer payments relative to public goods expenditure, at a decreasing rate. Furthermore, increases in the tax rate, from relatively low levels, are associated with increases in the relative importance of transfer payments. But beyond a certain level, further tax rate increases are associated with a lower ratio of transfers to public goods, because of adverse incentive effects.

Fiscal Policy Reforms and Dynamic Laffer Effects

We examine the impact of fiscal policy reforms on the long-run government budget balance in a one-sector model of endogenous growth with factor income taxes, a tax on consumption, non-productive public goods expenditures, and a labour-leisure trade-off. In addition, we allow for different structures of government expenditures and public debt. We analytically show that, when performing a dynamic Laffer effect analysis, there exists a set of conditions that hold for a number of endogenous growth models. We find that for the euro area an improvement in the long-run government budget balance is always obtained for a lower tax rate on capital income but is only obtained for a substantial lower tax rate on labour income. Moreover, we show that when lower taxes on factor income are financed by higher taxes on consumption, there exists a wide array of combinations for which there is an improvement in both the long-run government budget balance and lifetime welfare. These combinations, however, differ in their implications for labour supply and immediate welfare effects.

Teaching and Learning Guide for: Democracy and Nationalism

Teaching and Learning Guide for: Democracy and Nationalism

Is the Allocation of Resources within the Household Efficient? New Evidence from a Randomized Experiment

I study whether households make Pareto‐efficient intrahousehold resource allocation decisions. Combining randomized variation in women’s income generated by the evaluation of the Mexican PROGRESA program with variation attributable to localized rainfall shocks as distribution factors in the collective model, I find evidence favoring Pareto optimality. More specifically, female‐specific income changes have positive effects on children’s goods expenditures, whereas changes due to rainfall shocks have a smaller influence on household public goods expenditures. The evidence is consistent with female partners having greater sensitivity to own‐income changes and norms that oblige women to devote their earnings to meet collective consumption needs.

Modelling the composition of government expenditure in democracies

This paper considers majority voting over the ratio of transfer payments to per capita expenditure on public goods. A model is constructed in which individuals vote for government expenditure on a public good, for a given income tax rate. Labour supply is endogenous. The equilibrium ratio of transfers to public good expenditure is a function of the ratio of median to mean wages and the tax rate. Cross-sectional regressions confirmed that reductions in the skewness of the wage rate distribution are associated with reductions in transfer payments relative to public goods expenditure, at a decreasing rate. Increases in the tax rate initially increase the importance of transfer payments but eventually tax rate increases lead to lower transfers.

Pay-As-You-Go Resource Auctions

Under the Vickrey-Clarke-Groves (VCG) mechanism, the divisions of a corporation are asked to report profit projections for each feasible allocation of corporate resources. Based on these reports, headquarters determine an efficient allocation and distribute side payments to the divisions that reward truthful revelation of the divisions' private information. Both the required reports and headquarters' optimization problem grow rapidly in complexity with the number of heterogeneous resources to be allocated. This paper discusses two designs that aim to reduce the complexity of both the divisions' reporting tasks and headquarters' optimization task through an iterative and distributed procedure. The designs apply to resources that affect only their recipient (private goods) as well as to resources that create positive or negative externalities for other divisions (public goods). The designs allow divisions to subsidize or penalize the consumption of public goods by other divisions and uses a differential, pay-as-you-go pricing rule to reward truthful revelation of private information. The VCG mechanism thus implemented holds some promise as a practically viable allocation process for corporate resources.

Valence Advantages and Public Goods Consumption: Does a Disadvantaged Candidate Choose an Extremist Position?

Does a disadvantaged candidate always choose an extremist program? When does a less competent candidate have an incentive to move to extreme positions in order to differentiate himself from the more competent candidate? If the answer to these questions were positive, as suggested in recent work (Ansolabehere and Snyder (2000), Aragones and Palfrey (2002), Groseclose (1999), and Aragones and Palfrey (2003)), this would mean that extremist candidates are bad politicians. We consider a two candidates electoral competition over public consumption, with a two dimensional policy space and two dimensions of candidates heterogeneity. In this setting, we show that the conclusion depends on candidates relative competences over the two public goods and distinguish between two types of advantages (an absolute advantage and comparative advantage in providing the two public goods).

AID TIED TO THE DONOR'S EXPORTS

Abstract. The existing theory of tied aid presupposes that trade and aid are conducted in terms of private consumption goods. However, in such a world aid can be effectively tied only if the recipient government somehow prevents its households from reselling the aid basket on world markets. That weakness of existing theory is here removed by extending the theory to accommodate non‐tradable public consumption goods. The most striking result of existing theory – that, even in a world of just two trading countries, the donor might benefit and the recipient suffer from the tying of aid – is preserved.

Congestion Pricing with Heterogeneous Travelers: A General-Equilibrium Welfare Analysis

Traffic congestion pricing is studied using a general-equilibrium framework that incorporates public goods expenditures, an income tax, a government budget constraint, and preferences for equity. Individuals differ with respect to wages, values of travel time, and the congestion characteristics of their vehicles. Formulae for optimal tolls are derived and decomposed to reveal the separate influences of individual and vehicle heterogeneity, road network effects, fiscal effects and equity concerns. Using an example various tolling regimes are considered, defined by how much of the network is tolled, by whether and how tolls are differentiated by route, and by vehicle and individual characteristics.

Public Consumption and Public Infrastructure in a Dynamic Economy

We study the politico-economic equilibrium of a parametric version of the neoclassical growth model, uncovering the link between economic fundamentals, and (i) the level of government, and also (ii) the composition of government spending between public consumption and public infrastructure. Public consumption goods enter the utility function of households and public infrastructure enhances the productivity of the private sector. Government spending is financed via marginal income taxes and households vote over both the level of government and its composition. Voters partly internalize the tax wedges on capital accumulation and also the benefits of public infrastructure, so higher capital intensity and more patience of households lead to less government, a more productive composition of fiscal spending and higher steady state capital and income level. We compare our policies with these of a static framework and also with the dynamically efficient policies.

Unemployment, Social Transfers, and International Capital Mobility

This paper analyzes the consequences of international capital mobility for national social-transfer policy and unemployment in a model with workers of different skill and income levels. Social transfers may cause unemployment of low-skilled workers if the transfer level exceeds their potential incomes on the labor market. Because of these employment effects, social transfers may influence the international allocation of capital. The equilibrium transfer policy with capital mobility may differ from the policy in a closed economy. However, as the paper shows, capital mobility does not necessarily imply a reduction of social transfers. The paper also considers capital taxes and the supply of public consumption goods in this framework.

Determinants of Quality of Life in Dimapur Nagaland (India)

This study is an attempt to identify the determinant factors of quality of life in Dimapur and its periphery. Dimapur town is the most important and cosmopolitan commercial centre of Nagaland, India. We delineate the township into five concentric rings around the CBD and every ring into several sectors. Then twenty one sites have been chosen randomly from these sectors; four each from the first and the second sectors, five each from the third and the fourth sectors, and three from the fifth sector (control). From each site, we have selected eleven households randomly to collect information on the scheduled variables - 113 in number - reflecting various aspects of quality of life (e.g. education, housing, utilities and amenities, accessibility, waste disposal and environment, income & expenditure, entertainment, health condition, etc.). In total, we have surveyed two hundred thirty one (231) households. Factor analysis is used for resolving the multivariate complex of data into a handful of composite variables identified as: (1) High-End Consumption, (2) Low-End Consumption; (3) Consumption of Public Goods, Commons and Negative Spillovers, (4) Supplementary Consumption, and (5) Health-related Attributes. A regression analysis of spatial distribution of mean factor scores over the sectors of the township reveals that mean scores of factors #1, #2, and #4 (that are closely related with standard of living) are lower in the CBD and rise as we move away to sectors #2 and #3. They attain their peak in sector #3 and after that the experience a decline as we move away further to sectors #4 and #5. On the other hand, factor #3, monotonically decreases as we move away from the central business district (CBD) to the periphery. The CBD is more crowded and polluted. It caters to the largest floating population who over-use the public facilities there. Factor #5 (related with poor health conditions) scores higher in the CBD and as we move away to sectors # 3 and #4, a decline is observed. Health conditions are poorer in the CBD and better in sectors #3 and #4. But due to poor conditions of living, health in the rural areas scores poorer. We conclude that standard of living and consumption of public goods/services including negative spillover determine quality of life. The QOL in the medial sector between the CBD and the periphery is better than that in other sectors mainly due to higher standard of living but QOL due to consumption of public goods/externalities monotonically improves as we move away from the CBD. The overall index of quality of life has a weak relationship with the nature of employment of the respondents. The advance Nagas (Semas, Angamis, Aos and Lothas) score favourably on the Factors of QOL relating to the standard of living, but they also share the negative spillovers of urban living more in proportion. Zeliangs and Kukis score unfavourably on the standard of living but they share the urban externalities and negative spillover of urban living lesser in proportion.