State Fiscal Structure and Economic Development Policy

This essay adds a new dimension to the debate concerning taxes and business location decisions by raising a simple, but perhaps underappreciated point concerning political implications of state and local fiscal structure for state economic development policy. Low taxes may well be attractive to business owners and their employees; however, a fiscal structure that is not incentive-compatible with economic expansion may end up frustrating public policies of all types aimed at promoting growth. Economic growth may be seen as increasing types aimed at promoting growth. Economic growth may be seen as increasing demands for public services, thereby placing upward pressure on tax rates faced by the original taxpayers. In Wyoming, this problem is compounded because the tax base is narrow and highly income inelastic and the incidence of taxes levied falls significantly on out-of-state residents who do not benefit from public services provided. Additionally, prospects for reducing the mismatch between taxpayers and public service beneficiaries appear to be limited because, quite understandably, state residents do not wish to pay more for public services for which they have historically paid cents on the dollar.     

Analysis of Local Sales Taxation in Rural Areas: An Oklahoma Case Study

This study examines the impact of tax rates and tax rate differentials in a trade area on local sales tax revenues. Sales data for FY 1986 were analyzed for the 75 nonmetropolitan communities in Oklahoma with populations between 2,500 and 50,000. Multiple regression techniques were used to estimate local tax revenues as a function of tax rates, tax rate differential and local community economic and locational attributes. The results indicate that the tax rate differential was not significantly related to local revenue collection in the overall sample, but that the differential was significant for rural communities with relatively higher tax rates. Tax rate, income, service sector employment and a gravity factor were also significant influences on local sales tax revenues. These results imply that, because of the unique characteristics of rural retail markets and the dominance of rural trade centers, these rural trade center cities are able to raise local tax rates and effectively export tax burden to nonresidents without significantly affecting their retail sales when the tax differential is not a large one.     

Regional Economic Activity and Petroleum Industry Incentive Policies: Utah's Uintah Basin

ABSTRACT Proponents of petroleum industry subsidies often assert that such policies will have positive economic implications for rural communities. This paper examines the economic impacts of such a policy in Utah. Specifically, this paper quantifies the direct and indirect economic and fiscal impacts of a tax credit granted for oil and gas well workovers in Utah's Uintah Basin. The analysis is made possible by an input-output model constructed specifically for Utah's oil producing economy. The tax credit policy was found to generate a net fiscal loss for the state. However, it does generate employment in the Uintah Basin. The total per job cost to the state of generating an average of one job per year for 5 years through the tax credit policy is $24,056 (1991 dollars). However, if the public expenditure impacts are taken into account, then the cost per job could be as high as $48,423 (1991 dollars). Whether there are other ways to generate the same employment gains at a lower cost was lost in the political debate surrounding this petroleum industry tax credit.     

Highway Accessibility,Location Rents,and the Efficiency of Metropolitan Area Tax Base Sharing

One solution that has been proposed for the fiscal disparities in fragmented metropolitan areas is the sharing of taxes generated by commercial and industrial property. A criticism of this proposal is that it distorts the efficient pattern of business locations resulting when an implicit market for business locations is allowed to develop through the independent fiscal behavior of communities and the optimizing location behavior of businesses. Critics recognize that the efficiency argument against sharing a metropolitan area's business tax base must be qualified to the extent that local governments possess location advantages which enable them to extract rents from business firms. This paper presents an empirical analysis which permits a partition of the local property tax payments from industrial firms into accessibility location rents and compensation payments to the community for the negative externalities of industrial development. The empirical analysis suggests that approximately 40 percent of the industrial taxes received by communities in this analysis represents accessibility location rents. It is concluded that these receipts could be redistributed through a metropolitan area tax base sharing program without affecting the efficiency of the implicit market for business locations.     

Determining Citizen Satisfaction with Local Public Education in Indonesia: The Significance of Actual Service Quality and Governance Conditions

Indonesians appear content with local public education, despite independent concerns about quality in the international context. Over 85 percent of respondents from the recent Governance and Decentralization Survey claim to be at least somewhat satisfied with primary school education. This study argues that the generally high levels of reported satisfaction are probably exaggerated because of courtesy bias, low expectations, and optimistic predispositions. Survey responses are best thought of as indicative of relative, and not absolute, levels of satisfaction. The empirical examination shows that objective measures of service quality and governance conditions are both significant determinants of the probability that households are satisfied with local public education. The significance of governance holds regardless of whether pertinent variables are assumed to be exogenous or whether they are specified as endogenously determined, although the endogenous specification performs much better, in general. The evidence suggests a cautious approach toward the use and interpretation of score card initiatives, which attempt to employ citizen satisfaction as a close proxy for actual quality of services, in nonrandom samples, and without controlling for other factors. In addition, the results provide a novel rationale for improving the local governance environment.     

Metropolitan growth and decline in the United States: an empirical analysis

"Urban growth rates are documented for the largest United States Metropolitan Statistical Areas for the periods 1965-70 and 1975-80. The spatial pattern associated with these growth rates tends to reinforce the sunbelt-frostbelt dichotomy, as the majority of cities with positive migration rates for both time periods are located outside of the heavily industrialized Northeast and Midwest regions of the country. Two and three-group discriminant analyses indicate that manufacturing activity, local tax rates, and spending on education, are particularly important discriminators between growing and declining cities."     

State-level austerity,education, and large urban labor markets: Evidence from fiscal policy experiments in Kansas and Wisconsin

In 2011, Kansas and Wisconsin experimented with fiscal austerity policies. Proponents of the tax and public expenditure cuts argued that they would spur economic growth, while opponents claimed that it would harm vulnerable populations. I use the timing of these policies and the synthetic control method to examine how state-level austerity affected earnings per worker for high and low education segments of the workforce in major urban areas. The results suggest that the Kansas and Wisconsin fiscal experiments hurt low education workers in some urban areas. The estimates also show heterogeneity in the treatment effect. Notably, Madison, WI, was the only urban area that experienced substantial positive growth in both education segments.     

A Synthesis of Empirical Research on the Impact of Government onLong‐Run Growth

This paper provides a synthesis of the 1983–98 published literature on the empirical evidence regarding the interaction between government policies and growth. Five policy areas are considered: general government consumption, tax rates, education expenditures, defense and public infrastructure. The most conclusive results in the literature relate to the positive impact of education expenditures on growth. Public infrastructure also appears important. Regression analysis remains the most commonly adopted research methodology. A better link with current theories will be obtained when parameter calibration methods formicro‐foundations based models replace parameter estimation of regression models with ad hoc specifications. Nonetheless, there remain severe limitations on what can be learned for policy from highly aggregative models of endogenous growth. Better data are needed at the regional macro and meso levels to complement thecurrently available pooled cross‐section time‐series country data. The potential endogeneity of government fiscal variables can be resolved through the selection of appropriate instrumental variables, such as those that arise in cases of “natural experiments”.     

Back to Nukunuku: Employment,identity and return migration in Tonga

Abstract: Return migration has escaped significant analysis in the Pacific island region. Both migration from and return migration to the Tongan village of Nukunuku are for multiple reasons, with migration centred on employment and education, and return centred on the social context of home and duty. Return is limited, with intentions not being matched with practice, and the village and national population not growing. However, return migrants acquire skills, capital and experience overseas, which can be transferred into a Tongan cultural context, although identities have changed during migration. Return migrants typically take up employment or acquire businesses on return, gain some social status from the outcome, and are neither failures nor retirees. Nonetheless, return engenders expectations and tensions exist between returnees and more established residents, although ultimately, return migrants contribute to household, local and national development, as part of an unfinished process.     

Poverty and Local Governments: Economic Development and Community Service Provision in an Era of Decentralization

Social scientists have given substantial attention to poverty across U.S. localities. However, most work views localities through the lens of population aggregates, not as units of government. Few poverty researchers question whether governments of poorer localities have the capacity to engage in economic development and service activities that might improve community well‐being. This issue is increasingly important as responsibilities for growth and redistribution are decentralized to local governments that vary dramatically in resources. Do poorer communities have less activist local governments? Are they more likely to be engaged in a race to the bottom, focusing on business attraction activities but neglecting services for families and working people? We bring together two distinct literatures, critical research on decentralization and research on local development efforts, that provide contrasting views about the penalty of poverty. Data are from a unique, national survey of county governments measuring activity across two time points. The most consistent determinants of activity are local government capacity, devolutionary pressures, and inertia or past use of strategies. Net of these factors, levels and changes in poverty do not significantly impact government activity. There is no evidence the nations' poorest counties are racing to the bottom. Findings challenge views that poverty is a systematic structural barrier to pursuing innovative economic development policies and suggest that even poorer communities can take steps to build local capacity, resources, and networks that expand programs for local businesses and low‐wage people.     

The Economics and Politics of Tax Increment Financing

ABSTRACT Tax Increment Financing (TIF) is a popular yet controversial tool that allows local governments to use property tax revenue to fund the public costs of economic development. Since TIF gives one local government the power to affect the tax bases of the overlapping jurisdictions, there is uncertainty and argument on the part of government officials and taxpayers as to who really finances the program. To evaluate the alternative contentions, this paper presents a general methodology that identifies which taxpayers in which locations fund the TIF's expenditures, and sets forward the conditions under which such a local economic development policy can be beneficial to taxpayers. The paper applies the model to study the TIF program currently active in downtown Des Moines, Iowa. The evidence indicates that the taxpayers in the entire metropolitan area subsidized the downtown activities in the early years, but now pay lower property tax rates due to the city's TIF-financed urban revitalization program.     

The Impact of Public School Attributes on Home Sale Prices in California

The quality of public schools is often cited as an important attribute which distinguishes a community. Indeed, a recent public opinion poll conducted by the California Public Education Partnership indicates that residents rank improvements in public education higher than such high profile issues as environmental quality and crime reduction. In order to explore the role of educational quality in determining residential property values, a hedonic housing price model is used on a large sample of homes which sold within Fresno County in California over the period 1990‐1994. After controlling for a wide range of housing characteristics and neighborhood features, the findings indicate that the school district does significantly influence the real sale price. Then the relative importance of inputs into the production of educational services is investigated as compared to output measures of productivity. These findings suggest that both input and output measures are important. However, elasticity estimates of input measures tend to be higher than those of output measures, with the average class size by far the strongest influence. There is some evidence to suggest that the benefits of additional teachers likely outweigh the costs. Finally, the findings suggest that attributes of schools are more highly valued by local residents than either crime or environmental quality measures within the community.     

城乡基本公共服务差距测算与均等化技术路线分析-以福建为例

差距大小与人口流动性是影响城乡基本公共服务均等化技术路线选择的重要因素。文章在测算分析福建城乡公共财政支出、基础教育与医疗服务的差距变动情况的基础上,探讨了人口流动性不断增加对城乡基本公共服务均等化的影响,比较了依靠人口流动与依靠财政支出两条促进城乡基本公共服务均等化的技术路线,提出以财政支出确保最低公共服务标准,以人口流动加速城乡基本公共服务均等化进程的建议。     

Tax Incentives in an Economy with Public Goods

This study employs a dynamic computable general equilibrium (CGE) model of Ohio to evaluate the effect of a state corporate tax cut. The innovative features of this study are (1) the use of the cost of capital concept, (2) dynamic adjustment mechanisms in factor markets, and (3) incorporation of public goods in the household utility function and firms' production functions. The model results indicate that the stimulatory effects of tax cuts for economic development are muted when effects of public expenditures on the productivity of private capital and the migration of households are taken into account. This is because the reduction in public expenditure due to the tax cut implies (1) lower productivity for private industries and (2) lower levels of labor in-migration during the initial several periods after the policy shock as compared to the pre-policy sequence of equilibria. This study shows that evaluation of tax policy without simultaneously considering the effect of public goods can be misleading.     

Private Government Formation in the DC Metropolitan Area

ABSTRACT This paper examines a variety of quasi-governmental organizations, mandatory homeowners' associations, special service districts, and transportation management associations, recently established in the urban region. Using the Washington, DC metropolitan area as a case study, this paper explores reasons for their development and implications of them for urban governance. It is argued that these organizations marry the concepts of public special districts and public-private partnerships in a process of private government formation. Private governments, it is suggested, are not wholly a private response to the shedding of services by the public sector, the dominant notion of privatization and local state restructuring, but the result of demands emerging in the private sector stimulated by social and spatial change. This signals the need to add to the concept of public-driven privatization the process of private initiated change where the resulting goods and services are more fully shaped by the needs of private interests. The evidence suggests these institutions do not represent a scaling back of the local state as privatization implies, but an extension of state structures in a fundamentally new direction, an extension which could be labeled the parallel state.     

Public intervention,private aspiration: Gated communities and the condominisation of housing landscapes in Singapore

While the proliferation of gated communities worldwide has generated great interests and debates, the emergence of gated communities is by no means a ‘global’ urban phenomenon that displays uniform characteristics and genesis. Drawing on Singapore as a case study, this paper goes beyond the universalising and often polemical discourses on gated communities to provide a balanced account on how gated communities in the form of enclosed condominium estates are locally embedded in the city state where public housing dominates. As will be pointed out in the paper, gated communities in Singapore may be considered as a form of ‘club good’ that exists as part of the state's urban/national developmental agenda and are, arguably, less socially and spatially divisive than those depicted elsewhere. By teasing out the local specificities of gated communities, this paper underscores the need to read beyond the physical form of gated communities in order to understand the complex social and political production of housing landscapes.     

城乡基本公共服务差距测算与均等化技术路线比较——以福建为例

为了揭示差距大小与人口流动性对城乡基本公共服务均等化的影响,选择符合中国实际的城乡基本公共服务均等化技术路线,文章以城乡常住人口为基数,在测算分析福建城乡公共财政支出、基础教育与医疗服务的差距变动情况的基础上,探讨了人口流动性不断增加对城乡基本公共服务均等化的影响.比较分析得出完全依靠人口流动对社会的冲击较大,完全依靠财政支出的效率较低,进而提出以财政支出确保最低公共服务标准,以人口流动加速城乡基本公共服务均等化进程的技术路线建议.     

Rapid Metropolitan Growth and Community Disparities

Does rapid growth in a metropolitan area amplify or reduce disparities among its differentiated communities? Theoretical economic and political arguments can support both tendencies but lean in the direction of greater differentiation and disparities following a period of rapid regional growth. This article examines uneven population, employment and tax base growth as both causes and consequences of economic and social disparities. The analysis posits that growth bypasses the built-up and lowest income communities in favor of the more distant middle-income suburbs with extensive land for development. The implications of these uneven growth patterns are widening inter-municipal disparities consistent with growth rates. The analysis is carried out for the 365 contiguous jurisdictions in northern New Jersey, a region that experienced modest growth in the 1970s and rapid growth in the 1980s. The findings confirm the uneven pattern of growth and widening disparities during the growth spurt of the 1980s.     

A Regional Comparative Static CGE Analysis of Subsidized Child Care

ABSTRACT Concerns with the equity of societal income distribution typically underpin the provision of government subsidies to low‐income households, in which such subsidies are commonly believed to reduce economic growth. Using a regional computable general equilibrium (CGE) model, this study examines the equity and growth aspects of subsidizing formal child care services for low‐income households at the state level. The results suggest that state government subsidization of formal child care services does not necessarily reduce the level of economic activity, even when accounting for negative growth effects of tax increases required to finance the subsidies. The CGE model also reveals economic impacts on households and industry sectors not directly affected by the subsidies, impacts that would be omitted from a partial equilibrium microeconometric appraisal.