TAX COMPETITION IN THE PRESENCE OF INTERJURISDICTIONAL EXTERNALITIES: THE CASE OF CRIME PREVENTION*

ABSTRACT The paper analyzes the effect of fiscal competition when local governments choose the level of public goods that generate spillover effects elsewhere. For instance, law enforcement activities affect both the crime level in the jurisdiction providing the good and in neighboring communities. The model shows that when local governments rely on capital taxation to finance these expenditures the spillover effects may not lead to an inefficient provision of public goods as predicted by the tax competition literature. In the model, capital is costlessly mobile and offenders relocate responding to differential criminal opportunities and differential local law enforcement efforts.     

How real estate became ‘just another asset class’: the financialization of the investment strategies of Dutch institutional investors

The managers of a growing wall of money are continuously searching for investment opportunities. The financialization literature describes how this mobile capital puts pressure on commodities, debt, public services and economic activities to transform into investable, tradable, financial products. Regarding real estate, these investigations show how opaque, local, non-standardized goods, highly depending on both local legislation and developments, have been transformed into liquid, globally traded financial assets. By analysing the real estate investment strategies of Dutch institutional investors since the 1980s, this paper shows how a quantitative framework increasingly provides the basis for institutional investors’ real estate investment strategies. Direct ownership of properties has been exchanged into shares of properties, that is, fictitious capital, creating an impetus for ‘objectified numbers’ to measure the performance of these indirect investments. As knowledge about real estate has been outsourced, Dutch institutional investors now perceive real estate increasingly as ‘just another asset class’, thereby increasing leverage and volatility. This paper not only shows how finance ‘financialized’ itself by adopting a quantitative investment perspective, but it also offers an empirical account on how investment properties are transformed into financial assets that put pressure on state agencies to mobilize urban planning to deliver more of such assets.     

Access to capital markets and the geography of productivity leaders and laggards

This paper examines whether access to the capital market of convertible and nonconvertible bonds affects total factor productivity (TFP) for the population of Italian joint stock manufacturing companies, based in highly segmented local financial markets, between 2007 and 2017. The hypothesis, well grounded in the literature, is that long-term capital favors investment in intangibles and other risky assets necessary for productivity growth. To identify this effect, we exploit the exogenous shock of the Italian banking deregulation of the mid-1990s as an instrument for firm-level access to capital, interacted with distance from logistic networks. These reforms changed the distribution of the type of branches at the local level, increasing the share of joint stock banks, which have high connections to international capital markets. This geographical reallocation of banking activities ultimately affected firms' financial structure, favouring their access to capital, even when based in peripheral financial areas. Firms which issued instruments of market debt achieved higher levels of productivity and a higher probability to reach top percentiles of productivity distribution.     

Federal Aid and Rural County Highway Spending: A Review of the 1980

The Reagan/Bush Administrations cut back federal support for state and local governments during the 1980s, causing total real resources available to finance local roads and bridges to increase very slowly between 1977 and 1989. The effect of federal aid on spending for infrastructure has been subject to debate for many years. Some studies have indicated that federal aid is stimulative, while others report that federal aid substitutes for local resources. This article examines the effect of state and federal aid on county highway spending. The analysis demonstrates that, in 1987, federal aid was stimulative but state aid was not. In light of changes brought about by the Surface Transportation Efficiency Act of 1991 (ISTEA), we can expect federal aid to have a stronger relationship with local highway spending.     

Structural change in local finance during China��s reform era: A case study

By looking at one particular case, this study determines what resources were available to local governments in order to finance local economic development in the reform era. It finds that although local finance expanded tremendously in this era, and extra-budgetary revenue also increased, those two things did not produce much financial surplus for capital construction and fixed investment. The only source at the local government’s disposal was cheap land expropriated from local peasants. Land thus becomes the key to understanding local finance during the reform era.     

Multilevel Instruments for Infrastructure Investment: Evaluating State Revolving Funds for Water

In recent decades, the federal government has introduced complex, multilevel state‐operated revolving loan fund programs as an instrument for promoting state and local investment in national infrastructure priorities while limiting direct federal involvement in implementation. A federally funded state revolving fund (SRF) program combines features of a categorical matching grant to states and a subsidized loan program to localities, both of which should lower the effective price of infrastructure investment and therefore promote higher levels of infrastructure investment. However, little evidence exists to date on whether these programs stimulate new subnational spending or instead displace spending that would have occurred otherwise. We evaluate the stimulus effects of SRFs by examining the two largest such programs, the Clean Water and the Drinking Water SRF Programs. Analyzing 17 years of state‐level panel data, we find evidence that the flow of federal funds to states under the SRF programs stimulates new local investment in wastewater infrastructure, but not in drinking water infrastructure. In discussing several possible explanations for these divergent results, we argue for further research that emphasizes the intergovernmental features of this financing tool.     

China's Infrastructure Investment Boom and Local Debt Crisis

A noted Hong Kong-based economist addresses the emerging financing problems prompted by debt-laden local governments in China in the aftermath of the global financial crisis. More specifically, using the most recent data available, he traces the root of China's local debt overhang to a protracted debt-financed infrastructure investment boom in which several key institutions (the cadre evaluation system, the land management regime, and the banking sector) have created an environment that draws local governments into a land-infrastructure-leverage trap. The author argues that the resulting high levels of debt may ultimately impede the country's efforts to mitigate structural imbalances in its economy. Journal of Economic Literature, Classification Numbers: H600, H700, P200, P300. 3 figures, 9 tables, 121 references.     

Tradeoffs between Local Taxes and Government Spending as Determinants of Business Location*

Abstract. This paper investigates the effects of local fiscal policy on the location decisions of 3,763 establishments that began operations in Maine between 1993 and 1995. Empirical results, estimated from Poisson and negative binomial regression models, indicate that businesses favor municipalities that spend high amounts on public goods and services, even when these expenditures are financed by an increase in local taxes. This suggests that a local fiscal policy of reduced government spending, to balance a tax cut, may attract fewer new businesses than a policy featuring additional spending and higher taxes.     

基于夏普里值法的城市更新单元规划空间增量分配方法探析——以深圳市岗厦河园片区为例

本文以深圳市岗厦河园片区改造为例,根据合作博弈和夏普里值法的相关理论,分析了城市更新改造过程中利益形成和分配的微观机制。研究发现,城市更新改造能够实现权利关系的合理再建,其前提是保证各方的收益与其在改造中的价值贡献比例对等。换而言之,城市更新改造过程所产生的总收益可以认为是权利主体所投入的空间资本、公共资本和改造资金等要素所创造的合作收益,应该按照各项要素在收益创造过程中的贡献情况以及权利主体对于要素的占有情况来分配改造后的收益。以此为基础,在空间结构优化完成的同时也能够实现对于利益相关者权利关系的理顺和明晰。     

Trade Liberalization and the Fiscal Squeeze: Implications for Public Investment

This article examines the impact of trade liberalization on the level and structure of government expenditures across countries, with particular emphasis on low income countries. It develops the argument that the policies employed during trade liberalization have resulted in a fiscal squeeze as a result of declining tax revenues and rising interest expenditures. To surmount this fiscal hurdle, expenditures on physical capital, which have negligible political ramifications, have been reduced. Other more politically sensitive expenditures, such as spending on social capital, have been financed by incurring additional debt. However, additional debt has exerted upward pressure on interest payments, further exacerbating the fiscal situation. The statistical analysis carried out to examine the evidence uses panel data for eighty developing and industrialized countries over the period 1970–98 and employs a fixed–effects regression framework to account for country–specific characteristics. The results indicate that trade liberalization has indeed resulted in declining revenues and higher interest expenditures and that these factors have contributed to the observed decline in infrastructure spending.     

The Effect of Public Infrastructure on the Private Productive Sector of Spanish Regions

In this paper we analyze the effect of infrastructure on the cost and productivity performance of the private productive sector of Spanish regions over the period 1980–1993. We use a dual approach based on cost functions that allows us to recover the usual parameters estimated with production functions. In addition, we obtain rates of return and cost elasticities of production factors at the regional level. Our framework explicitly considers that some factors are quasi-fixed and their volume can differ from their optimal endowment levels. Our results indicate that the public sector has contributed significantly to enhance productivity and reduce costs in the private sector of almost every Spanish region. Nevertheless, there is still scope for the government to continue its investment efforts, given that there remains an appreciable gap between observed and optimal public capital, and we find that in the long run, public capital promotes private investment.     

THE STRUCTURE OF METROPOLITAN FACTOR AND PRODUCT MARKETS*

ABSTRACT. In this study we use a translog profit function and iterate seemingly unrelated regressions to estimate a system of factor demand and output supply functions for metropolitan economies. Our sample includes all metropolitan areas defined by the Census in 1977 for the period 1962 to 1982. Estimation shows that all price elasticities are elastic and that the signs are as expected. These results hold true for virtually all model specifications. Our findings indicate that federal, state, and local tax policies have significant impacts on factor demand and output supply. Public investment plays a positive and significant, but small, role in increasing output and in complementing other factors, although this influence has declined over time. Additionally, capital provided by the private sector has a substantially larger impact on output and employment than does capital provided by the public sector.     

STATE, CLASS AND INTERNATIONAL CAPITAL 2: THE DEVELOPMENT OF THE BRASILIAN STEEL INDUSTRY

This paper examines the forces underlying the development and form of the Brasilian steel industry since the 1930s. Foreign direct investment has been limited by Brasilian nationalist policies and by higher costs of steel production, but large scale, integrated plants could not be built by private capital due to insufficient resources. Thus the Brasilian steel industry combines large scale state owned plants (financed by foreign capital) and smaller scale privately owned plants. The operations of the plants are coordinated to reduce market uncertainty, permit the steel sector to advocate its own expansion plans, and delimit the spheres of public and private capital while excluding foreign commodity and productive capital. Even so, in the 1980s the steel industry in Brasil has faced a crisis of declining local demand, prompting a rapid expansion of exports.     

THE LONG-RUN ECONOMIC IMPACTS OF FEDERAL,STATE, AND LOCAL FISCAL POLICIES IN METROPOLITAN AREAS*

ABSTRACT. This paper uses new estimates of metropolitan factor demand and output supply functions to study how federal, state, and local fiscal policies affect metropolitan economies. We illustrate our work with findings for ten metropolitan areas in five states for changes in state corporate income taxes, local property taxes, the federal corporate income tax, an investment tax credit, interest rates, public capital stocks, output prices, and tax and regulatory policies affecting gross wages. It is clear from these simulations that a policy that is nominally the same everywhere will have repercussions that vary widely across regions and cities.     

Unions,Parties, and the Politics of State Government Legacy Cost

Many American state governments have made extensive promises to pay for employees’ health care and other benefits in retirement. Currently estimated at over $1 trillion in unfunded liabilities, these other postemployment benefits (OPEB) are creating a major fiscal problem for state governments. In this article, we examine the politics of OPEB. We seek to explain the variation in the generosity of OPEB across U.S. states. We argue that party competition theories do not adequately explain the outcomes we observe. Instead, we draw on the emerging Schattschneiderian approach to the politics of public policy to show that public union strength conditions a party's incentives to represent unions’ interests. In states where public sector unions are strong, unions can find their way into either party's coalition. We find that Republicans are more responsive to public union interests than either their ideological brand or prior research would suggest. It is only in states where public employees are weak that Republicans can act unilaterally and enact their preference for less government spending. To test our theories, we carry out an empirical analysis using a newly assembled data set of per capita OPEB liabilities across 49 states.     

Congo's Odious Debt: External Borrowing and Capital Flight in Zaire

During the dictatorship of Mobutu Sese Seko, Congo (or Zaire, as Mobutu renamed the country) accumulated a public external debt of roughly $14 billion. At the same time, Mobutu and his associates extracted wealth from the country. By 1990, real capital flight from Zaire amounted to $12 billion. With imputed interest earnings, the accumulated stock of Zairian flight capital was nearly $18 billion. Congo's successor governments may be able to repudiate liability for the Mobutu regime's debts on the basis of the doctrine of odious debt. Creditors could then seek to recover their losses by identifying and impounding flight capital which was extracted from the country.     

A BENEFIT-COST ANALYSIS OF A REGIONAL DEVELOPMENT INCENTIVE: STATE LOANS*

The luster of economic growth, the existence of depressed regions, and the fear of competition from giveaway programs in other states have all resulted in state governments adopting a rash of programs designed to encourage a strong manufacturing base for their economy. Many economists feel uneasy about the rapid spread of such industrial incentive programs as tax breaks, government loans, and industrial revenue bonds.¹ The literature of public finance, development, and regional economics contains many interesting studies examining the wisdom of these undertakings. This paper hopes to contribute by developing a method of benefit-cost analysis for appraisal of industrial incentive programs. Even though the model is constructed for and applied to the analysis of state government industrial development loans, the principles formulated should be easily adaptable to the assessment of other types of regional development programs. A secondary objective of the paper is to discuss the first empirical application of a model which accounts for possible differences between the social opportunity cost of foregone investment and that of foregone consumption.²     

Government institutions and the dynamics of urban growth in China

Economic growth in China in recent decades has largely rested on the dynamism of its cities. High economic growth has coincided with measures aimed at improving the efficiency of local governments and with a mounting political drive to curb corruption. Yet the connection between government institutions and urban growth in China remains poorly understood. This paper is the first to look into the link between government efficiency and corruption, on the one hand, and urban growth in China, on the other hand and to assess what is the role of institutions relative to more traditional factors for economic growth in Chinese cities. Using panel data for 283 cities over the period between 2003 and 2014, the results show that the urban growth in China is a consequence of a combination of favorable human capital, innovation, density, local conditions, foreign direct investment, and city‐level government institutions. Both government quality—especially for those cities with the best governments—and the fight against corruption at the city level have a direct effect on urban growth. Measures to tackle corruption at the provincial level matter in a more indirect way, by raising or lowering the returns of other growth‐inducing factors.     

HISTORY,INSTITUTIONS, AND CITIES: A VIEW FROM THE AMERICAS*

ABSTRACT Every nation, formally or informally, defines and establishes the lines of political and fiscal authority among its national, regional, and local governments. Historically, centralized governments tend to restrict the power and autonomy of provincial and local governments. In this paper, we exploit the quasi‐experimental distribution of political institutions in the Americas caused by variation in European colonial experience to examine the impact of institutions on urban and local development, specifically on the degree of urban primacy, the size distribution of cities, the number and density of local government units, and the fragmentation of metropolitan areas. We argue that centralization of political power at the national level, as experienced in many countries in Latin America, contributes to urban primacy and a size distribution of cities favoring large cities. Additionally, even in more politically decentralized countries such as Canada and the U.S., variance in political centralization at the provincial (state) level over local governments led to significant divergences in urban primacy, the distribution of city sizes, as well as the form, number, and density of local governments. While we cannot rule out the importance of other factors, our findings suggest that political centralization affects spatial economic development.     

Talent,technology and tolerance in Canadian regional development

This article examines the factors that shape economic development in Canadian regions. It employs path analysis and structural equation models to isolate the effects of technology, human capital and/or the creative class, universities, the diversity of service industries and openness to immigrants, minorities and gay and lesbian populations on regional income. It also examines the effects of several broad occupations groups—business and finance, management, science, arts and culture, education and health care—on regional income. The findings indicate that both human capital and the creative class have a direct effect on regional income. Openness and tolerance also have a significant effect on regional development in Canada. Openness towards the gay and lesbian population has a direct effect on both human capital and the creative class, while tolerance towards immigrants and visible minorities is directly associated with higher regional incomes. The university has a relatively weak effect on regional incomes and on technology as well. Management, business and finance and science occupations have a sizeable effect on regional income; arts and culture occupations have a significant effect on technology; health and education occupations have no effect on regional income.