Inter–Jurisdictional Cost–Sharing of Public Spending

2010 ◽  
Vol 28 (2) ◽  
pp. 179-186
Author(s):  
Michele G. Giuranno

Abstract This paper deals with the issue of how two geographically separate jurisdictions should share the cost of a centralized and uniformly provided public good. The key assumption is that jurisdictional representatives make decisions by bargaining in die centralised legislature. Results suggest that jurisdictions may reach a mutually beneficial agreement by equalising the net welfare gain produced by the provision of die public good, rather than the public good cost. The model identifies the efficiency and redistributive implications of such an agreement.

Public Choice ◽  
2020 ◽  
Author(s):  
François Facchini ◽  
Elena Seghezza

AbstractThe aim of this article is to help explain the history of the public spending-to-GDP ratio in France by examining the production of laws and regulations. It empirically finds a positive and significant relationship between the number of pages in the Official Gazette of the French Republic and the development of the public expenditure-to-GDP ratio. We rely on the number of pages in the Official Gazette as a proxy for the cost of implementing laws and regulations. If unchecked, a proliferation of laws and regulations expands public spending. Over the period 1905–2015, a 10% increase in pages caused a 1.14% increase in the public expenditure-to-GDP ratio.


1992 ◽  
Vol 6 (3) ◽  
pp. 117-131 ◽  
Author(s):  
Charles L Ballard ◽  
Don Fullerton

Economists have long been concerned with finding an efficient level of public expenditure. The classic statement of the problem was given by Paul Samuelson (1954). An optimal level of expenditure is where the sum of the marginal rates of substitution between the public good and a reference good equals the marginal rate of transformation between the public good and the reference good (ΣMRS = MRT). However, Samuelson's formula assumes that all of the revenue needed to finance public goods can be raised with lump-sum taxes. Since this is not generally possible, the formula must be modified to account for the distortionary effects of the tax system. An appropriate modification is to multiply the cost side of the equation by a term that is commonly called the marginal cost of public funds (MCF). In the case of Samuelson's formula, where government is entirely financed with lump-sum taxes, the MCF would be exactly 1.0. In the traditional view of economists, distortionary taxes cause the MCF to be greater than one, thus raising the cost of providing public goods. In this paper, we discuss some cases where the MCF may be less than one. We will illustrate this possibility using numerical examples for labor taxes.


2007 ◽  
Vol 97 (1) ◽  
pp. 118-149 ◽  
Author(s):  
Marco Battaglini ◽  
Stephen Coate

This paper develops an infinite horizon model of public spending and taxation in which policy decisions are determined by legislative bargaining. The policy space incorporates both productive and distributive public spending and distortionary taxation. The productive spending is investing in a public good that benefits all citizens (e.g., national defense) and the distributive spending is district-specific transfers (e.g., pork-barrel spending). Investment in the public good creates a dynamic linkage across policymaking periods. The analysis explores the dynamics of legislative policy choices, focusing on the efficiency of the steady-state level of taxation and allocation of spending. (JEL D72, E62, H20, H50)


2012 ◽  
Vol 13 (1-2) ◽  
pp. 82-102 ◽  
Author(s):  
Wolfram F. Richter ◽  
Berthold U. Wigger

AbstractThe present article discusses the question of how to share the cost of higher education between the benefitting individual and the public optimally when labour income is taxed. Building on some previous work on the efficiency effects that income taxation has on human capital investment, the article demonstrates that in the presence of progressive income taxation a strong case can be made for the public to assume a fair share in the cost of higher education. The mix of private and public financing is shown to be efficient when the public share just neutralizes the negative effect that income taxation has upon the willingness to invest in higher education. The article then examines the efficient pattern of cost sharing in more detail. The article argues in favour of a two-part cost sharing scheme. The first part requires that the public subsidizes the cost of higher education to such an extent that the disincentive effect of progressive income taxation is neutralized. The second part requires that all remaining private expenditures are granted tax deduction against the income earned after studying. A particular virtue of the proposed two-part cost sharing scheme is that it gives individuals proper incentives to deploy effectively the stock of human capital acquired by studying.


2017 ◽  
Vol 9 (3) ◽  
pp. 187-212 ◽  
Author(s):  
Markus Kinateder ◽  
Luca Paolo Merlino

We study a local public good game in an endogenous network with heterogeneous players. The source of heterogeneity affects the gains from a connection and hence equilibrium networks. When players differ in the cost of producing the public good, active players form pyramidal complete multipartite graphs; yet, better types need not have more neighbors. When players differ in the valuation of the public good, nested split graphs emerge in which production need not be monotonic in type. In large societies, few players produce a lot; furthermore, networks dampen inequality under cost heterogeneity and increase it under heterogeneity in valuation. (JEL D63, D85, H41)


1999 ◽  
Author(s):  
Mark E. Sibicky ◽  
Cortney B. Richardson ◽  
Anna M. Gruntz ◽  
Timothy J. Binegar ◽  
David A. Schroeder ◽  
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2017 ◽  
Vol 1 (1) ◽  
pp. 1-8
Author(s):  
Andrew R. Kear

Natural gas is an increasingly vital U.S. energy source that is presently being tapped and transported across state and international boundaries. Controversy engulfs natural gas, from the hydraulic fracturing process used to liberate it from massive, gas-laden Appalachian shale deposits, to the permitting and construction of new interstate pipelines bringing it to markets. This case explores the controversy flowing from the proposed 256-mile-long interstate Nexus pipeline transecting northern Ohio, southeastern Michigan and terminating at the Dawn Hub in Ontario, Canada. As the lead agency regulating and permitting interstate pipelines, the Federal Energy Regulatory Commission is also tasked with mitigating environmental risks through the 1969 National Environmental Policy Act's Environmental Impact Statement process. Pipeline opponents assert that a captured federal agency ignores public and scientific input, inadequately addresses public health and safety risks, preempts local control, and wields eminent domain powers at the expense of landowners, cities, and everyone in the pipeline path. Proponents counter that pipelines are the safest means of transporting domestically abundant, cleaner burning, affordable gas to markets that will boost local and regional economies and serve the public good. Debates over what constitutes the public good are only one set in a long list of contentious issues including pipeline safety, proposed routes, property rights, public voice, and questions over the scientific and democratic validity of the Environmental Impact Statement process. The Nexus pipeline provides a sobering example that simple energy policy solutions and compromise are elusive—effectively fueling greater conflict as the natural gas industry booms.


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