Abstract
This paper examines whether spillovers from local market human capital are important in explaining the distribution of productivity across Malaysia. We develop an empirical method for describing local human capital distributions based on the idea that spillovers are limited in scope by costs of interaction or economic distance between agents. We use estimates of the economic distance between agents to construct measures of local market human capital based on schooling rates of the population within a given radius. These measures are then used in estimating equations obtained from a simple local public goods model. Our regressions are estimated using spatial GMM, allowing for general spatial correlation across observations as a function of economic distance. We find positive wage and rent differentials associated with local human capital, evidence consistent with productive human capital spillovers. Our results for rent differentials obtain with two distinct human capital measures; however, those for wage differentials depend on the human capital measure used.
The Tiebout model of competition in the local market for public goods is an important and controversial theory. The current debate revolves around the apparent disparity between macro empirical studies that show greater efficiency in the supply of public goods in polycentric regions compared to consolidated ones and micro evidence of widespread citizen-consumer ignorance, which has been used to argue that individual actions cannot plausibly lead to efficiency-enhancing competition between local governments. We argue that competitive markets can be driven by a subset of informed consumers who shop around between alternate suppliers and produce pressure for competitive outcomes from which all consumers benefit. Using data from a survey of over five hundred households, we analyze the role of these marginal citizen-consumers and incorporate the costs of information gathering and the strategic interests of local governments into the competitive market model.
The basic properties of international public goods are analyzed in the paper. Special attention is paid to the typology of international public goods: pure and impure, excludable and nonexcludable, club goods, regional public goods, joint products. The author argues that social construction of international public good depends on many factors, for example, government economic policy. Aggregation technologies in the supply of global public goods are examined.
