On the political economy of state highway expenditures: Some evidence of the relative performance of alternative public choice models

This paper explores the extent to which the public demand for roads and/or power of special interest groups determines road expenditures at the state level using an extension of the methodology developed in Congleton and Shughart (1990). Reduced form models of median voter demand, special interest group equilibria, and a combined model are estimated using cross-sectional state data from the United States. We generally find support for the hypothesis that voting matters. The pure median voter models have a better fit than the pure special interest group models. Moreover, in our combined model, we find that variables from the median-voter model can not be dropped without significantly reducing the combined model's fit.     

State Government Expenditure Determinants and Tax Revenue Determinants Revisited

The primary aim of the research was to test the general hypothesis that many institutional and political variables affect fiscal outcomes; that the preferences of public officials, and the decision processes used to act on those preferences, matter. State government data (state only, not state and local) from 1980, 1985, and 1990 were used to specify state tax revenue and expenditure models. A previous (Merrifield, 1991) state tax revenue model identified many significant institutional and political variables, but it was based only on 1985 data (49 observations). The larger data set (147 observations), including better data for some of the variables, indicated that most of Merrifield's (1991) findings are robust. The state expenditure models facilitated a second test of the general institutional and political variable hypothesis, as well as the hypotheses about specific variables. The expenditure model also facilitated comparisons of expenditure and tax determinants, and comparisons with results published in the literature. Though there are some noteworthy differences between the expenditure and tax models, the expenditure models also supported many of the institutional and political variable hypotheses.     

The demand for local government goods

Abstract. This paper analyses the spending preferences of local government elected politicians. It is argued that the median voter model is inappropriate in multi-party systems that provide multiple government services, and that the preferences of the representatives are consequential to local resource allocation. We develop a micromodel in which service demand is conditioned by exogenous public revenue, prices, and demographic factors. We hypothesise that politicians demands are affected by party affiliation, public sector occupation and committee assignment. The estimates of the micro demand functions are based on data pertaining to Norwegian local governments. It is found that the estimated income elasticities correspond approximately with elasticities of output studies. Party affiliation has an impact on demand patterns, while government occupation and committee appointment are major determinants of politicians desired allocation of public services. Further analyses reveal that the numerical strength of parties impacts weakly on the actual service allocation, whereas the representation of government employees has occasional effect. The budgetary allocations are imperfect expressions of the elected council's underlying preferences.     

The median voter model in public choice theory

The changing perception by public choice theorists about the relevance of the median voter model is a result of excessive extrapolation of the conclusions of theoretical models to the real world. Early in the 1970s the median voter model was often accepted as implying that the output produced in the public sector was what was most preferred by the median voter. This claim is excessive because the median voter model is only a model of demand aggregation under majority rule and has little to say about the supply side of the public sector. In the late 1970s many scholars identified several circumstances under which the model would not apply in theory, but these critiques of the model were often viewed as reasons to abandon the median voter model altogether. The model went from having excessive claims that made the model appear to be more powerful than it really is to excessive claims that made the model appear to be less powerful than it really is. These latter claims were often in response to the earlier claims rather than to the model, appropriately applied.Pointing out that the model might not be valid under some circumstances in no way implies that the model is never valid. In fact, this paper has reviewed strong arguments, both empirical and theoretical, suggesting that the median voter model is a good approximation of demand aggregation in the public sector for many issues. One paper will not change the opinions of public choice theorists on the median voter model. But the argument given here is that there is a large amount of theoretical and empirical evidence supporting the median voter model as a good foundation for the development of the theory of public sector demand. Once the overly ambitious claims that have been made for the model are set aside, the median voter model is in a good position to provide a base for the development of a theory of political structure that is analogous to the theory of market structure in economics.     

The impact of citizen influence on local government expenditure

This paper examines the impact of three measures of direct citizen influence — the initiative, referendum, and recall — on the level of local public expenditure for a national sample of communities with 10,000 persons or more. Two types of statistical tests are performed to analyze the role of the median voter model and to measure the effect of these governmental characteristics on the level of public spending. Like earlier literature, this paper finds only modest effects of these structural characteristics on local government expenditure. Alternative methodologies are needed to explore the ambiguities which exist in many of the previous studies.     

Interrelationships among public spending preferences: A micro analysis

This paper examines a system of qualitative demand equations for public spending on education, welfare, housing, health, highways, and defense. The demand for public spending for a particular category is hypothesized to be a function of income, tax-price, private benefit measures, and tastes as well as demands for other public expenditure categories. Based on individual survey data, the conditional maximum likelihood estimates of the logit equations are obtained. The results indicate the significant role of tastes, private benefit variables, and tax-prices. In addition, positive rather than negative, demand interrelationships are found to exist. These findings question the validity of the median voter hypothesis as a model for public budget allocation.     

The median voter model across levels of government

The median voter model provides a method of aggregating individual voter's demands to obtain community demand. Although higher level governments are often assumed to be less responsive to voters than lower level governments, it remains an open question whether or not the median voter model, which has been found to apply to the lowest tier of the federalist system, extends to higher level governments. We use the Cox specification test to find that the ad hoc model dominates the median model for counties and states. The county results are sensitive to the time periods, budgetary structure, and degree of urbanization.     

Governmental behavior in representative democracy: a synthesis of the theoretical literature

What is the impact of bureaucratic behaviors on tax rates? What is preferable: a bureaucrat or a partisan politician? Does a flypaper effect occur when lobby groups influence public policies? This article tries to answer these questions by analyzing and comparing six different models of public choice: (1) the median voter model, (2) the Leviathan model, (3) the slack-maximizing model, (4) a general model of bureaucracy, (5) the partisan politicians model and (6) a general model of lobbying. Among several results, it is shown that the median voter’s income and tax share almost always play a significant role in the design of the public good/tax package, even if the government does not explicitly try to maximize the median voter’s utility. The article also provides a synthesis of the positive analysis of the flypaper effect.     

Is the Median Voter a Clear-Cut Winner?: Comparing theMedian Voter Theory and Competing Theories in Explaining LocalGovernment Spending

This paper attempts to test the power of the median model againstthe respective strength of other alternate models based onredistributive, political-institutional and interest group theoriesin explaining the demand for public spending in New York statecounties during 1990, 1980 and 1970. To execute the comparison ofthe performance of median voter model with that of each of thenonmedian voter ones, various nonnested tests such as J and JAtests, N-tilde, W and encompassing tests have been employed.Results of the study show that although the median voter model hasa marginal edge over the rival models based on the alternativetheories, it may not be relied upon solely when many otherinstitutional, redistributive and interest group factors are alsorelevant for explaining public spending. The results of this studydiffer from those in Congleton and Bennett (1995). We do not findthat interest group models are substantially weaker than the medianvoter model.     

Local government internal structure, external constraints and the median voter

This paper examines how internal structure and external constraints affect local government ability to meet voters' demands. It applies the revealed preference method to US counties to identify those that fail to satisfy the pure democracy outcome of the median voter hypothesis (MVH). Probit analysis identifies the factors associated with counties that satisfy the MVH. Internal government structure does not matter but restricting home rule increases the likelihood of satisfying the MVH equilibrium, the latter result consistent with the leviathan model. The systematic differences found for urban and rural county governments reinforce this conclusion.     

Hold your nose and vote: corruption and public decisions in a representative democracy

This paper analyzes how corruption alters policy decisions in democracy, and examines whether this distortion can result in a long-term persistence of corruption even when the voters are well informed and rational. By applying a citizen-candidate model of representative democracy, the paper analyzes how corruption distorts the allocation of resources between public and private consumption, altering the policy preferences of elected and nonelected citizens in opposite directions. The outcome is a reduction in real public expenditure and, if the median voter??s demand for public goods is sufficiently elastic, a reduction in taxes. In this case, some citizens benefit indirectly from corruption. The paper also presents some empirical evidence that, in democratic countries, corruption results in lower tax revenue, and proceeds to show that, when this occurs, citizens anticipating a shift in preferences in favor of public expenditure may support institutions that favor corruption. This result complements the findings of other studies that have attributed the persistence of corruption in democracy to some failure on the part of the voters or the electoral system. It also bears implications for developing effective anticorruption strategies and for redefining the role that can be played by the international community.     

Easy Money: Tax Exporting and State Support for Higher Education

There is a substantial literature that assesses the effects of tax‐exporting capacities on the tax structures and aggregate spending levels that state governments choose to implement, but no work exists that isolates the effects of state tax exporting on higher education spending. Using state‐level data for 1989, 1995, 2002, and 2007, we estimate for the median voter in each state the change in the marginal cost of higher education subsidization generated by tax exportation, and calculate the increased higher education spending that results. We consider three types of spending: state appropriations to public universities as well as need‐ and non‐need‐based aid awarded to in‐state students. We find that neither type of aid is responsive to the marginal cost, or tax price, faced by the median voter. However, the median voter's price elasticity of demand for state appropriations is statistically significant and negative. We find that the median voter's tax price is substantially reduced by the presence of prominent mining and tourism industries and by the federal deductibility offset available to firms. Thus, these tax‐exporting capacities exert upward pressure on voter demand for state appropriations to public universities.     

The Political Implications of Redefining Public Expenditure in the United Kingdom

This article examines the role, significance and consequences of decisions in the United Kingdom about the definition of public expenditure for planning and control purposes. Three major definitional issues are examined: the narrowing in 1977 of the UK public expenditure definition from a public-sector-wide definition to something much closer to the OECD's 'general government' definition; the treatment of the proceeds of asset sales as negative expenditure; and the introduction in the 1990 white paper of a planning total excluding local government expenditure. Three sets of consequences are examined: the eroding commitment to comprehensive coverage; the resulting policy distortions; and the erosion of conventions traditionally governing the relationships between central and local government. Grounds for unease with present developments are identified, notably the fragmentation of public expenditure documentation and the loss of information, the consequences of which will unfold as public expenditure faces a difficult period because of problems of macro-economic imbalance.     

财政分权与地方政府行政管理支出——基于中国省级面板数据的实证研究

行政管理支出具有双重属性:过多的支出不利于经济增长,使地方政府在竞争中处于劣势而不利于官员的晋升,同时有违中央政府的宏观政策目标;但能直接提高地方政府官员个人的福利水平。所以,地方政府及官员对行政管理支出存在两难选择。本文利用我国30个省(自治区、直辖市)1998—2006年的面板数据对财政分权与行政管理支出的关系进行实证研究和稳健性检验。主要结论是:在中国特色财政分权的制度环境下,地方政府在财政支出自由裁量权扩大时,总体效应是加大了行政管理支出的规模。同时,行政人员规模与行政管理支出存在显著的正相关关系。地区经济发展水平、资源禀赋、社会结构等因素对行政管理支出也有显著性的影响。在公共财政体制改革的背景下,其他公共财政支出项目(社会保障支出除外)对行政管理支出存在显著的"挤出"效应。     

A distributional theory of government growth

This article presents a closed form solution for time-consistent taxation and public spending in a dynamic game between government and median voter. Extending Meltzer and Richard’s static analysis of government size the article offers a theory of growth of government. At low stages of economic development the median voter, identified as a relatively poor worker, prefers to have no or only small redistributive taxation in order to foster savings. Through this channel he expects improvements of his labor productivity and wage. At higher stages of development, however, when capital is relatively abundant and prospects of further labor productivity gains through capital accumulation are smaller, the incentive to tax and redistribute income rises. Yet, in line with previous work on growth and infrastructure spending the median voter prefers a constant share of productive public spending at all times. Hence, government growth is solely driven by an expanding welfare state.     

地方政府公共服务创新：驱动机制与路径选择——中国情境下的分析框架和经验证据

不断推进地方政府公共服务创新是破解当前公共服务供给困境,构建我国治理体系和治理能力现代化的重要组成部分。在对国内外相关文献分析的基础上,从政治制度、社会需求和资源支撑等视角出发,构建了中国情境下地方政府公共服务创新驱动机制的分析框架,通过模糊集定性比较分析的方法,对"中国地方政府创新奖"下公共服务创新类项目进行了系统比较分析。研究发现,在中国情境下,晋升激励是引致地方政府创新成功的充分条件,领导支持是驱动地方政府创新成功的必要条件;而在创新的代表性路径中,公民参与和媒体报道也发挥着重要作用,经济发展水平和改革本身的难度对创新工作的影响有限;行政主导型、需求诱发型和多方互动型的创新模式是我国地方政府公共服务创新时选择的主要路径模式。未来中央应更注重从制度层面激发地方政府公共服务的创新热情,降低社会公共服务需求的政府进入门槛,同时应注重激发公共服务创新要素组合的叠加效应。     

Public Co-Financing of Private Sector's Investments: Subsidiarity and Corruption

The literature on corruption makes unclearpredictions on the relations betweensubsidiarity principle, according to whichpublic decisions should be done at thelower level government possible, andcorruption of public officials. In thispaper, we compare two alternative regimes,centralised vs. decentralised, forthe public co-financing of privateprojects. We show that, in the absence ofcorruption, the two regimes give the same results. Borrowing from the Chamberlin's analysis ofmonopolistic competition and from therent-seeking literature, we introducecorruption in the model as a selling costfor the private suppliers. We show that acentralized regime causes higher corruptionlevels because of the higher number ofprivate suppliers of competing projects. Asa result, a central government tends tohave a higher level of public capitalexpenditure than two (equally corruptible)regional governments.     

The Effect of Tax and Expenditure Limitations on Revenue Volatility: Evidence from Colorado

Much of the research on tax and expenditure limitations (TELs) focuses on the impact that limits have on the size of the public sector or the distribution of expenditures at the state and local levels. While these results shed light on the extent to which TELs succeed in reducing government spending, they do not have much to say about the impact of TELs on government budgeting or financial planning, despite the fact that voters support TELs in the hope of reducing government inefficiency (Courant, Gramlich, and Rubinfeld 1980; Ladd and Wilson 1982). This paper examines the effect of TELs on the stability of government revenues; sound tax policy entails controlling the volatility of revenues in order to plan more effectively for the future. Using panel data from Colorado's Division of Local Government as well as the Census Bureau's Annual Survey of State and Local Government Finances, this paper examines the impact of Colorado's 1992 Taxpayer's Bill of Rights (TABOR) on local government finances. Results from difference‐in‐difference estimation suggest that TELs increase revenue and expenditure volatility.     

(De)Centralization and voter turnout: theory and evidence from German municipalities

A vast academic literature illustrates that voter turnout is affected by the institutional design of elections (e.g., compulsory voting, electoral system, postal or Sunday voting). In this article, we exploit a simple Downsian theoretical framework to argue that the institutional framework of public good provision—and, in particular, the distribution of political and administrative competences across government levels—likewise affects voters’ turnout decisions by influencing the expected net benefit of voting. Empirically, we exploit the institutional variation across German municipalities to test this proposition, and find supportive evidence.     

Ideological change and the economics of voting behavior in the US, 1920–2008

This paper tests the proposition that voters advance a more liberal agenda in prosperous times and turn more conservative in dire economic times. A reference-dependent utility model suggests that, with income growth, the relative demand for public goods increases and the median voter is more likely to vote Democrat. With slowing income growth, the median voter derives increased marginal utility from personal income—making taxation more painful—and is more likely to vote Republican. Ordinary and instrumented analyses of a new time series for the US median voter are encouraging of this income growth model. This work links voting behavior to economic business cycles and shows that ideological change is endogenous to income growth rates.