Constitutional Prohibitions in a Rent Seeking Model

I extend the standard rent seeking model to allow lobbying fora constitutional prohibition on wealth transfers. I examinetwo issues: (1) the ability of special interests withsignificant political capacity to block constitutional change;and (2) the effect of adding a constitutional stage on totallobbying expenditures. Defeating a prohibition on wealthtransfers is a public good for rent seekers; success inconstitutional politics merely allows them to lobby for wealthtransfers. The resulting collective action problem for rentseekers in constitutional politics offsets the generalinterest's free rider problems, reducing the probability oftransfers and expected total lobbying expenditures compared tothe traditional rent seeking contest. Introduction of aconstitutional stage also reverses several comparative staticsresults from the rent seeking game. An increase in the numberof rent seekers or the general interest's (consumers') abilityto organize increase lobbying in the rent seeking game butgenerally reduce expected lobbying in the constitutionalprohibition game.     

Presidential campaign expenditures: Evidence on allocations and effects

This paper analyzes the impact of presidential campaign spending on election results. Analyses of expenditures and voting are often plagued by simultaneity between campaign spending and expected vote share. However, game-theoretic models of resource-allocation decisions made by a central actor (i.e., a presidential campaign) suggest that candidates will spend more in close races and in races likely to be pivotal. We provide empirical support for this theory; using Federal Communications Commission data from the 1972 presidential election, we find that expenditures were higher in states where the election was expected to be closer and in states likely to be pivotal. We use these two factors as instruments in a two-stage least squares model to estimate the effect of spending on votes. We find that, contrary to previous theory and research, presidential campaign spending significantly increases a candidate's vote share.     

Fiscal decentralization and government size: An extension

This paper analyzes one method governments employ to circumvent the discipline of a competitive system of fiscal federalism — intergovernmental collusion in the form of intergovernmental grants. Grants, it is argued, serve to encourage the expansion of the public sector by concentrating taxing powers in the hands of the central government and by weakening the fiscal discipline imposed on governments forced to self-finance their expenditures. The results reported suggest that intergovernmental grants do encourage growth in the public sector. The results offer further support for the use of monopoly government assumptions in public sector modeling.     

Interstate migration,income and public school expenditures: An update of an experiment

This article re-examines the relative importance of per capita income and net out-migration (Weisbrod's welfare-maximization hypothesis) as determinants of expenditures for public primary and secondary education. A repetition of Weisbrod's experiment shows that the existence of a high correlation between per capita income and migration in the 1950s would have made it difficult to distinguish between their relative importance. An update of the experiment yields results contrary to the hypothesis that communities (states) are welfare maximizers. They support the contention that per capita income is a primary determinate of educational expenditures.     

The Political Viability of Carbon Pricing: Policy Design and Framing in British Columbia and California

The adoption of climate policies with visible, substantial costs for households is uncommon because of expected political backlash, but British Columbia's carbon tax and California's cap‐and‐trade program imposed such costs and still survived vigorous opposition. To explain these outcomes, this article tests hypotheses concerning policy design, framing, energy prices, and elections. It conducts universalizing and variation‐finding comparisons across three subcases in the two jurisdictions and uses primary sources to carry out process tracing involving mechanisms of public opinion and elite position‐taking. The article finds strong support for the timing of independent energy price changes, exogenous causes of election results, reducing the visibility of carbon pricing, and using public‐benefit justifications, as well as some support for making concessions to voters. By contrast, the effects of the use of revenue, industry exemptions/compensations, and making polluters pay are not uniform, because the effects of revenue use depend on how it is embedded in coalition building efforts and a middle path between exempting or compensating industry and burdening it appears to be more effective than pursuing just one or the other approach.     

Measuring the Impact of Lotteries on State per Pupil Expenditures for Education: Assessing the National Evidence

State‐operated lotteries have recently been asserted by public administrators and academicians as panaceas for eradicating revenue disparities existing across public school districts in the American states. The purpose of this research project is to empirically test the hypothesis that lottery revenues raise the state expenditures for public education. A state‐level national dataset, which includes fifty American states over the period 1977–1997, was used for the analysis. Pooled time‐series cross‐sectional and ARIMA modeling was employed to test the hypothesis. This study finds that lottery revenues had a positive influence on state per pupil expenditures for education. The evidence for the impact of lotteries on state per pupil expenditures for education was robust and statistically significant.     

A logistic growth theory of public expenditures: A study of five countries over 100 years

This paper offers a new theory and empirical testing of long-term trends of public expenditures for five countries. While Wagner’s Law would imply an exponential growth process of the ratio between public expenditures and national income (G/Y), the law should be rejected both on theoretical and empirical grounds, because it disregards the role of ever increasing distortionary taxation. However, under some conditions, the combination of Wagner’s Law and the Pigou’s conjecture that the excess burden of taxation constrains the growth of public expenditures can be captured by a non-linear first order differential equation. The equation is the Verhulst’s logistic, originally invented to model Malthusian predictions on population growth. The integration of a Verhulst equation generates an S-shaped curve. This analytical framework combines intuitions from a welfare economics and a public choice perspective, and potentially offers a new research strategy on the dynamics of government expenditures. We offer preliminary econometric estimates on long run trends (around 1870–1990) of G/Y in U.S., U.K., France, Germany, Italy. These estimates confirm a pattern of similar trajectories, in spite of different national parameters, and suggest that the logistic view of growth of government is consistent with observed data.     

Does Institutional Structure Effect Public Health Expenditures?

This paper explores supply‐side costs and institutional structure in a shared authority state public health system. It is found that in a shared governance public health system, intermediary district structure influences the movement of limited resources to serve populations and persons most in need. This early empirical test suggests that policy making and public administration concerning public health expenditures in a shared governance system are in a practical sense local, but decisions made at the intermediary level by regional district administration are an important influence on local public health expenditures.     

Overlapping jurisdictions: Substitutes or complements?

This paper presents a simple model of the demand relationship between the activities undertaken by overlapping governments and uses the framework to estimate the relationship between municipal and county expenditures. The empirical results reveal a complementary relationship between county and city general expenditures; any public sector expansion effects of monopoly power at the county level will therefore be reinforced by greater municipal spending, further expanding the total size of the local public sector. On the other hand, changes in county police and roads expenditures appear to have no strong stable impact on municipal police and roads expenditures, respectively, providing no reinforcing or offsetting municipal spending responses to decisions at the county level.     

Federal Expenditure and Fiscal Illusion: A Test of the Flypaper Hypothesis in Australia

Despite the fact that there are strong a priori grounds forpresuming that the intergovernmental grants characteristic offiscal federalism in Australia may generate fiscal illusion,no empirical effort has been directed at this line of inquiry.The present article seeks to go some way toward remedying thisdeficiency by evaluating the flypaper variant of the fiscalillusion hypothesis using a time-series analysis of AustralianCommonwealth expenditures for 1981 to 1992. The results of theseestimations provide some tentative empirical support for theexistence of a flypaper effect on public expenditure in Australiafor the period under review.     

Introduction to the issue in honor of Keith T. Poole

William Baumol’s model predicts a steady increase in relative public sector prices (or costs) because of the combination of slow productivity growth and wage growth similar to sectors wherein productivity is growing more quickly. In this paper, we extend the Baumol model with political variables and analyze price growth in defense and public administration using Norwegian data. We find strong support for the mechanism of the Baumol model since manufacturing productivity is the most important determinant of relative public-sector prices. Greater political fragmentation has also contributed to the price growth, but its quantitative effect is smaller than that of manufacturing productivity. An analysis of a labor-intensive private service (restaurants and cafes) supports the broader relevance of the Baumol mechanism and the validity of the estimated effect of political fragmentation on the two sectors considered herein.     

Public Attitudes Toward Social Spending in the United States: The Differences Between Direct Spending and Tax Expenditures

This paper uses a survey experiment to examine differences in public attitudes toward ‘direct’ and ‘indirect’ government spending. Federal social welfare spending in the USA has two components: the federal government spends money to directly provide social benefits to citizens, and also indirectly subsidizes the private provision of social benefits through tax expenditures. Though benefits provided through tax expenditures are considered spending for budgetary purposes, they differ from direct spending in several ways: in the mechanisms through which benefits are delivered to citizens, in how they distribute wealth across the income spectrum, and in the visibility of their policy consequences to the mass public. We develop and test a model explaining how these differences will affect public attitudes toward spending conducted through direct and indirect means. We find that support for otherwise identical social programs is generally higher when such programs are portrayed as being delivered through tax expenditures than when they are portrayed as being delivered by direct spending. In addition, support for tax expenditure programs which redistribute wealth upward drops when citizens are provided information about the redistributive effects. Both of these results are conditioned by partisanship, with the opinions of Republicans more sensitive to the mechanism through which benefits are delivered, and the opinions of Democrats more sensitive to information about their redistributive effects.     

Public expenditures in Canadian provinces: An empirical study of politico-economic interactions

It is widely believed that government ideology and electoral constraints are two major factors that influence the level of public expenditures. However, Frey and Schneider argue that the effects of the two phenomena are not simultaneous. Only when a government is popular can it pursue ideological goals, and when popularity is low, energies must be redirected toward gaining support from voters to win the next election. Data draw from the Canadian provincial case are used to test empirically this hypothesis. The findings support the Frey and Schneider explanation.     

Per-capita public expenditures and population size: a non-parametric analysis using French data

Based on the median voter model, we specify a flexible general framework of the effect of municipality size on per-capita public expenditures. Previous literature has recognized that municipality size should have a non-linear effect on the quality of public goods provision and to this end different papers have applied a range of alternative parametric specifications. Using a very large sample of French “communes” we are able to estimate the effect of municipality size semi-parametrically. In contrast with the parametric specifications, we find evidence of the U-shaped relationship between per-capita public expenditures and population which is predicted by theory.     

The impact of globalization on the composition of government expenditures: Evidence from panel data

According to the disciplining hypothesis, globalization restrains governments by inducing increased budgetary pressure. As a consequence, governments may attempt to curtail the welfare state, which is often seen as a drag on international competitiveness, by reducing especially their expenditures on transfers and subsidies. This globalization-induced welfare state retrenchment is potentially mitigated by citizens’ preferences to be compensated for the risks of globalization (“compensation hypothesis”). Employing two different datasets and various measures of globalization, we analyze whether globalization has indeed influenced the composition of government expenditures. For a sample of 60 countries, we examine the development of four broad expenditure categories for the period 1971–2001: capital expenditures, expenditures for goods and services, interest payments, and subsidies and other current transfers. A second dataset provides a much more detailed classification: public expenditures, expenditures for defence, order, economic affairs, environment, housing, health, recreation, education, and social expenditures. However, this second data set is only available since 1990—and only for OECD countries. Our results show that globalization did not influence the composition of government expenditures in a notable way.     

Does legislative turnover adversely affect state expenditure policy? Evidence from Indian state elections

The effect of legislative turnover on the size and composition of government expenditures in Indian states over the 1980?C2000 period is examined. The paper finds that excessive turnover in Indian state elections results in inefficient government expenditure policy. First, the higher the turnover, the larger the government size. Second, excessive turnover affects the allocative efficiency of government expenditures by skewing the composition of government spending toward pure consumption and away from more productive investment expenditures. Third, the effect of turnover on fiscal policy is not linear; public consumption expenditure is convex in turnover, while public investment expenditure is concave in turnover.     

Good Cuts,Bad Cuts: The Need for Expenditure Analysis in Decremental Budgeting*

Quantitative targets are widely used in decremental budgeting. On the macro-level, governments set global limits for the growth of public expenditures, government deficits, or the ratio of government spending to GNP. On the micro-level, reduction targets are frequently assigned to spending ministries or agencies on a selective basis or across-the-board. While this kind of targetry appears to be indispensable to achieve cutbacks, it is also very deficient in that it treats public expenditures as a fungible commodity, consisting of interchangeable units of account. As austerity policies are coming of age, the inherent weaknesses in the targets approach attract increasing attention, and there is growing concern about the quality of austerity measures. To make sound decisions on such measures, governments must develop a better understanding of the characteristics and properties of various public expenditures. This paper outlines four varieties of expenditure analysis that may contribute to ‘the leap from quantity to quality’ in decremental budgeting.     

Competition, expenditures and student performance in mathematics: A comment on Couch et al.

In a recent issue of this journal (August, 1993), Couch et al. find that competition, as measured by the percentage of school-age children in a county who attend private schools, increases student performance in public schools. In addition, they find that school expenditures are positive and significant, although only marginally significant, in terms of influence on student performance. This paper extends the work by Couch et al. in two ways. First, this paper defines competition so as to include the effects of other public schools as well as private schools on student performance. Second, this paper explores the simultaneity of student performance and expenditures within the model formulation. Evidence presented suggests (1) that competition, as measured by other public schools and private schools, increases student performance, and (2) that empirical studies in this area need to recognize the simultaneous relationship between student performance and expenditures.     

Expenditures on children and child support guidelines

This article examines the literature that estimates parental expenditures on children; describes the types of child support guidelines that are being used by the states; and compares how the child support awards that emerge from each state's guidelines compare to the empirical estimates of expenditure patterns on children. The findings indicate that the states' guidelines appear to be more or less consistent with the estimates of expenditures on children. In a few cases, however, the guidelines require less in support from the noncustodial parent than the parent would have spent on the child(ren) in an average intact family. In many other cases, the guidelines require child support payments that are very close to the lower bound of the estimates of expenditures. This article concludes with a discussion of the difficult value judgments that ultimately must be made in setting child support awards.     

Do elections affect the composition of fiscal policy in?developed, established democracies?

This paper investigates the impact of elections on the level and composition of fiscal instruments using a sample of 19 high-income OECD democracies during the period 1972–1999. We find that elections shift public spending towards current expenditures at the cost of public investment. Although we find no evidence for an electoral cycle for government deficit and overall expenditures, we find a negative effect of elections on revenue attributed to a fall in direct taxation. Our results apply for predetermined electoral periods while endogenous elections seem to increase deficit and leave the composition of fiscal policy unaffected.