Do states optimize? Public capital and economic growth

This paper develops a non-linear theoretical relationship between public capital and economic growth in order to obtain estimates of the growth-maximizing ratio of public capital to private capital. The model is empirically implemented using data on the 48 contiguous U.S. states over the period 1970 to 1990. The empirical results provide evidence that (i) the relationship between public capital and economic growth is non-linear, (ii) the growth-maximizing public capital stock is approximately 60% to 80% as large as the private (tangible) capital stock, and (iii) permanent changes in public capital are associated with permanent changes in economic growth. Received: October 1998 / Accepted: June 1999     

Infrastructure and regional growth,growth dynamics and policy relevance for India

The role of infrastructure in economic growth has been the subject of considerable research in the fields of public policy, economics, and planning. In this paper, I examine the contribution of publicly supplied infrastructure to sub national regional growth in India. I first develop and numerically examine a regionally disaggregated model of economic growth to understand the dynamics of private capital and public infrastructure. For the empirical analysis, I use a pooled data set for Indian states to examine if publicly supplied infrastructure is a significant determinant of regional growth and whether there are spatial variations in the productivity effects of infrastructure. The main findings are that transport and communications infrastructure expenditures are significant determinants of regional growth, and the positive benefits accruing from these expenditures come not only from investments made by individual states, but there are positive externalities from network expenditures made by neighboring states. Finally, the out of sample simulated regional growth predictions show divergence in private capital formation between lagging and leading states. The findings, interpretations, and conclusions are entirely those of the authors, and do not necessarily represent the views of the World Bank, its executive directors, or the countries they represent.     

Regional economic convergence: Do policy instruments make a difference?

The relationship between public capital, regional output and private sector productivity has been an issue of considerable interest in the regional development literature. There have however been few studies that develop linkages between these issues and the broader literature on economic convergence. This paper presents an innovative methodology to examine the process of regional economic convergence across U.S. states. We examine the effects of economic variables such as human and public capital in the convergence process, and control for business cycle and region specific effects in the analysis. Further, specification problems arising from spatial dependence are also addressed. Results from the empirical analysis show that the speed of convergence is influenced by region specific characteristics and the availability of trained labor in neighboring regions. Received: November 1998/Accepted: March 2000     

The spillover effects of public capital on the Turkish private manufacturing industries in the geographical regions

This paper investigates the spillover effects of public capital formation on the Turkish private manufacturing industry at the regional level over the period 1980–2000. The aggregate effects of public capital cannot be captured entirely from the direct effects of public capital installed in the region itself. Spillovers are also an integral part of the regional impact of public capital installed in the outside of the region. Therefore, we estimate the dynamic effects of public capital using VAR models for the seven regions of Turkey by including capital formation installed outside of the region. The results show that direct effects of public capital are positive in some regions, while indirect effects of public capital are positive in most regions. A previous version of this study was presented at the METU/ERC International Conference in Economics VII, 6–9 September 2003, Ankara, Turkey.     

Functional forms and the relevance of contiguous migration in the study of migration and employment growth

Previous studies on interstate migration have dealt with total migration without decomposing it into contiguous and noncontiguous migration flows. Since migration over borders of contiguous states may merely reflect changes in residence without changes in economic activities, the use of total migration data might reduce the reliability of empirical results. In this study, a simultaneous-equation model containing two equations, one for migration and the other for employment growth, has been specified in a general form and estimated by the 2SLS method for total, contiguous and noncontiguous migration flows. Results obtained from the use of 1970 Census data show that noncontiguous migration behaves significantly different from contiguous migration, and that noncontiguous migration, rather than total migration, should be used for the study of factors affecting interstate migration. Results also indicate that the log-linear functional form commonly used in empirical studies cannot be accepted statistically.     

Potential gains from more efficient spending on Texas highways

The Federal Highway Administration developed a state-level version of its Highway Economic Requirements System (HERS-ST) model to help states plan and manage their highway systems. Unlike frameworks that consider engineering sufficiency criteria only, the HERS-ST model also allows economic evaluation based on benefit-cost analysis. This study employs the model to address two questions about the level and allocation of investment spending on Texas highways: (1) Does the level of spending fall short of what is economically warranted and, if so, by how much? (2) Could a reallocation of spending between urban and rural areas, and among the highway functional classes produce substantial benefits? The results suggest that Texas is indeed under-investing in highway by a substantial amount. TxDOT expenditure on highway investments within the scope of HERS-ST averaged $2.7 billion per year during the 5 years starting FY 2000, and continuation of recent trends would bring the annual average for the 20 years starting in that year to about $3.4 billion. Relative to this 20 -year projected level of spending, our estimates from HERS-ST indicate that a near doubling would be economically warranted. The results also indicate that reallocation of investment spending, relative to the recent historical pattern, would produce substantial benefits. These gains are estimated at over $5.6 billion per year from reallocating funds from rural to urban areas, and over $1.0 billion per year from reallocating urban and rural funding among highway classes. The estimates are only broad indications, however, and numerous caveats apply.     

SPECIAL DISTRICTS,CITY GOVERNMENTS,AND INFRASTRUCTURE Spending in 105 US Metropolitan Areas

ABSTRACT: Special district structure in US metropolitan areas has not been analyzed, although studies document the growth of special districts and their impact on the coordination and planning activities of local governments. Few estimates have been made of public capital spending in metropolitan areas and none that classify spending by cities and special districts. Thus, there has been no comparison of how metropolitan areas differ in their reliance on special districts. This paper attempts to fill these research voids. The authors studied the 1987 capital spending patterns of 105 metropolitan areas. While the outlays for special districts were significant, city governments were the major force in infrastructure capital spending. Although metropolitan regions with high reliance on special districts had higher incomes, private capital investment was slightly higher. The authors found no evidence that reliance on special districts was associated with higher levels of outstanding debt.     

Infrastructure Finance: Aims,Attitudes and Approaches

There is an increasing awareness of the need to devise new methods of financing infrastructure. Two ways of decreasing reliance on public borrowing for infrastructure are by shifting public sector cost recovery from recurrent charges to capital levies and by making private interests directly responsible for providing and financing the service. Public sector pricing of infrastructure should aim to reflect long-run marginal cost; it should extend to cover external effects; and, where possible, its impact should accord with principles of social justice. The use of benefit assessment principles and developer contributions are two ways of achieving these objectives. There is undoubtedly also a role for private sector provision of some categories of infrastructure; but it is not as important as the development of a system of public sector cost recovery.     

Public capital, regional productivity and spatial spillovers

This paper examines the impact of infrastructure on productivity in the various regions of Spain. Using the duality approach and panel data, we estimate regional cost functions for the three main sectors of the economy for the period 1964–1991. Public capital is included as an unpaid factor of production, and two separate variables are used to establish whether the different categories of public capital have varying effects on costs. Results show that public infrastructure noticeably reduces private costs and increases overall productivity. We also estimate a production function with regional and time fixed effects. Finally, we include a study of spillover effects in transport infrastructure. Estimations suggest that such effects are of some relevance, a fact which may have serious implications for public policy on infrastructure. Received: January 2002 / Accepted: November 2004 All authors are members of the Academic Robotics Group. In listing The Academic Robotics Group, the authors are endeavoring to place each of the participant institutions on an equal footing in terms of effort and authorship. M. A. Talamini is serving as presenter.     

REINDUSTRIALIZATION IN DETROIT: CAPITAL MOBILITy AND CORPORATE INFLUENCE

The absence of a national economic development policy and the need of officials in older cities to rebuild the urban tax base have produced intense competition among municipalities and states to attract corporate investment. Local economic development programs combine state enabling legislation and federal funds to provide financial incentives and facilitate site preparation for new industrial and commercial facilities. The winners in this competition, however, have not been cities and their residents, but large corporations, whose position as major local revenue producers enables them to shape policies, not through behind the scenes manipulation, but through their capacity to withdraw badly needed private capital Although city officials are responsible for formulating development packages, they exercise little policy discretion: the mobility of corporate capital forces them to offer the maximum incentives allowed by state and federal laws.     

The commodification of land and housing: the case of South Korea

The developmentalist state in South East Asia has played an important role in guiding and promoting economic growth. Although an implicit theme of much of the discourse is the role of the state in controlling the factors of production, this is not located within the decommodification/commodification debate. Proceeding from the premise that underlies much of economic theory, namely that land values at a time reflect the residual (or surplus) of economic activity that requires land as a factor input, the purpose of this paper is to assess the extent to which the Korean state has managed the commodification of urban development and the distributional effects of this process. In spite of private land ownership the state has had a major impact on the processes by which land has become commodified, using extensive land expropriation and land‐use planning powers. The Korean state used different strategies to manage trends to commodification at different times: land readjustment projects were used from the 1950s to the 1970s and Public Management Development projects were the main mechanism of urban development from the 1980s. The urban development system was feasible because of the state's extensive control over access to housing finance (decommodified money). In the mid‐1990s there was a shift towards greater private sector involvement in urban development. The distributional effects of the urban development process have been highly inequitable. Subsidised home ownership for middle‐income families has been favoured over provision of public rental housing for low‐income families, driven in major part by cash flow considerations of the developmentalist state. Further, the basis of selecting beneficiaries has been very arbitrary. The system has promoted significant land concentration and land speculation particularly by private companies, including the large chaebol (corporations).     

Books Received

Problem: In 1997, the State of Maryland adopted a bold new approach to growth management based on a novel instrument: priority funding areas (PFAs). PFAs contain growth by directing state spending to areas designated by local governments and reviewed by the state government. Despite widespread acclaim and subsequent imitation, little is known about whether PFAs effectively contain urban growth.

Purpose: The purpose of this article is to evaluate the adoption, implementation, and performance of PFAs in Maryland in order to provide planners and policymakers with insights into their efficacy as instruments for managing growth.

Methods: First, we describe the statutory definition and mandated role of PFAs in state funding. Then, we describe the process used to create PFAs, the resulting pattern of targeted growth areas, the relationship between PFAs and local comprehensive plans, and the extent to which PFAs altered state spending. Finally, we examine the effects of PFAs on residential development patterns.

Results and conclusions: We find that PFAs have fallen short of expectations. The criteria used to establish PFAs produced boundary configurations that vary widely and are in many cases not ideally suited to managing urban growth. Ten years after their official designation, PFAs are not well integrated in land use decision making processes in many local jurisdictions. Finally, state agencies have not altered budgetary systems to monitor and guide the spatial allocation of funds and there is little evidence that after 10 years they have had any effect on development patterns.

Takeaway for practice: Targeting state funds to promote compact growth is a conceptually sound approach to urban growth containment, as land is less likely to be developed if it is not served by public infrastructure. But, as with other planning tools, the key is effective implementation. If states want to contain growth by targeting state spending, they must change budgeting processes to ensure that funds are spent appropriately and that the level of state spending is large enough to make a difference.

Research support: None.     

An empirical Stock-Flow Consistent regional model of Campania

We develop an innovative Stock-Flow Consistent macroeconometric regional model with five sectors, exploiting economic and financial statistics for Campania, covering the period 1995–2018, and propose a methodology to close the financial account of the private sector when financial data are lacking. The model is then used to perform medium term Economic Policy Scenario Analysis. We find that a debt-funded fiscal expansion has permanent positive effects on growth, with an impact multiplier above one and a medium-run multiplier of 0.71. In the case of a balanced-budget rule the same increase in government spending has still positive effects on growth – with a medium-run multiplier of 0.6 – but adverse ones on the private corporate sector.     

对私募基金投资房地产的思考

中国已成长为私募股权基金的重要投资目的地,虽然全球经济环境动荡,但并不意味着私募股权基金在中国的成长趋势发生改变。在此基础上分析房地产开发商的求钱若渴必带来私募基金的投资冲动。房地产企业融资渠道并不充裕,而房企融资模式也早已发生转变,在这种情况下,私募资金对房地产的投资值得思考和研究。     

Is human capital accumulation a self-propelling process? Comparing educational attainment levels of movers and stayers

The paper aims at understanding changes in the distribution and accumulation of intellectual capital. It compares the educational profiles of in-migrants and non-migrants across a sample of 303 U.S. counties and tests a stock-flow model that poses that a well-educated population stock attracts a well-educated migrant flow. The results suggest that newcomers are better educated than the resident population, and the education gap is most pronounced for newcomers from other states. The results further suggest that the educational status of newcomers (“in-migrants”) is positively related to the educational status of the resident population (“stayers”), thus implying a further agglomeration of human capital across space. However, for interstate migrants the effect is context-dependent, playing a greater role in urban settings and diminishing in more rural settings.     

Mega-event effects on the housing market: Evidence from the Beijing 2008 Olympic Games

Mega-event regeneration involves extensive government funds and public participation; thus, this study emphasises the importance of verifying if these financial and human investments can be justified by the net effects of mega-event regeneration. Accordingly, the contingent valuation method is used to establish a framework to quantify the welfare effects of event regeneration from the economic, social and environmental perspectives. We proposed a theoretical framework that enables the ranking of various event regeneration effects based on public welfare improvement. This holistic approach takes into account changes in economic, environmental, and social housing conditions due to mega-event simultaneously. This leads to more reliable estimation of mega-event effects on housing market. Our empirical findings indicate that, overall, accessible public transport, a sense of feeling good, air quality, relieved traffic congestion and green space are the top five welfare enhancers. Nevertheless, residents from different housing sectors or geographic regions value mega-event effects differently. Our results can assist the government to efficiently allocate limited public resources by looking after public needs. A better understanding of the heterogeneity of event regeneration effects on different housing sectors and geographic locations will also help governments to tailor public policies based on various social groups.     

REVIEW OF ANALYTIC TECHNIQUES FOR THE CRF

In recent years, several states have established venture capital funds to provide financing for new and small businesses, generally in technology-based industries, on the grounds that too few sources of venture capital exist for such firms. The experience of the oldest state venture fund, the Massachusetts Technology Development Corporation (MTDC), indicates that a state can successfully operate such a fund with an expectation of eventual profit and limited employment impact. However, state venture funds modeled after MTDC are unlikely to make a significant contribution to state economic development in broader terms, considering such issues as the structure and stability of the economy or the quality of the jobs they create.     

The effect of income taxes on interstate migration: an analysis by age and race

The topic of interstate migration and the effects of taxes on migration have been extensively studied. Prior research has examined not only many possible determinants of migration but also the migrations of various populations, including the elderly, African-Americans, and the college educated. The present study will attempt to differentiate itself from this prior research by looking at the effect of income taxes on the interstate migration of both whites and African-Americans at various ages. Another distinguishing feature of the present study is that it will use data from the NLSY-Geocode, a data set not used previously for this type of study. Results of the present study are similar to the results of prior works; income taxes have an effect on migration for most races and age groups. Individuals move from states with high income taxes to states with low income taxes; these results corroborate the results obtained from the use of aggregate, state-level data. In addition, results of the present study suggest that non-economic factors, such as ties to a particular state and changes in employment status, are also important factors in an individual’s migration decision.     

The Role of Spatial Development Frameworks in Transformation of the eThekwini Municipality,KwaZulu-Natal,South Africa: Reflecting on 20 Years of Planning

In the 20 years since the advent of a democratic government in South Africa, planned expenditure on infrastructure projects by municipalities has been used in part to redress inequalities and socioeconomic distortions created by apartheid. Our purpose in this article is to assess the effectiveness of planning instruments to achieve desired transformation in the case of the eThekwini Municipality. We evaluated demographic, spatial regional economic, settlement hierarchy, accessibility and functional analysis indicators to assess the eThekwini Spatial Development Framework (SDF) as it applies to the city of Durban, making particular use of the National Population Census results for 2001 and 2011, municipal data on housing and settlement distribution, the municipal evaluation roll, the Industrial Land Study of 2014 and the Eskom household survey of 2009. These data sets were mapped using Environmental Systems Research Institute (ESRI) GIS to analyse spatial changes over the decade from 2001 to 2011 to establish the ways and extent public investment guided by SDFs is responsive to spatial transformation imperatives. We found that, although there has been some economic and population growth, in-migration and densification of the inner city, there has been limited spatial transformation of the urban population, many communities still live in poverty, the traditional inequalities prevail and the benefits of democratic dispensation are elusive to many, despite substantial investment in infrastructure. Our analysis points to inadequacies of the planning tools and their application to spending public funds. Moreover, SDFs appear to be process and compliance-driven rather than inclusive of stakeholder concerns. We argue that they require substantial refinement to achieve the desired results.     

Contingent Valuation of First-Time Sewerage Provision in South-East England

Section 101A of the Water Industry Act 1991 requires that sewerage undertakers provide a public sewer to replace private wastewater systems if certain conditions are met. These include identification of pollution and amenity problems attributable to the private systems and economic justification of public sewer provision. Economic justification necessitates that the costs and the benefits of public sewer provision are compared. An environmental valuation study, using the contingent valuation method, has been carried out in three locations in south-east England to provide the average monetary value of the benefits accruing to households with unsatisfactory private systems. A statistical analysis of the survey-response data has yielded a monetary value which can be used in the assessment of the benefits of first-time public sewerage schemes.