Tiebout Choice and the Voucher

This paper examines who is likely to gain and who is likely to lose under a universal voucher program. Following Epple and Romano (1998, 2003), and Nechyba (2000, 2003a), we focus on the idea that gains and losses under a universal voucher depend on two effects: changes in peer group composition and changes in housing values. We show that the direction and magnitude of each of these effects hinges critically on market structure, i.e., the amount of school choice that already exists in the public sector. In markets with little or no Tiebout choice, potential changes in peer group composition create an incentive for high-socioeconomic (SES) households to vote for the voucher and for low-SES households to vote against voucher. In contrast, in markets with significant Tiebout choice, potential changes in housing values create an incentive for high-SES households to vote against the voucher and for low-SES households to vote for the voucher. Using data on vote outcomes from California's 2000 voucher initiative, we find evidence consistent with those predictions.

Public School Choice and Integration: Evidence from Durham, North Carolina

Using evidence from Durham, North Carolina, we examine the impact of school choice programs on racial and class-based segregation across schools. Theoretical considerations suggest that how choice programs affect segregation will depend not only on the family preferences emphasized in the sociology literature but also on the linkages between student composition, school quality and student achievement emphasized in the economics literature, and on the availability of schools of different types. Reasonable assumptions about how these factors differ for students of different races and socio-economic status suggest that the segregating choices of students from advantaged backgrounds are likely to outweigh any integrating choices by disadvantaged students. The results of our empirical analysis are consistent with these theoretical considerations. Using information on the actual schools students attend and on the schools in their assigned attendance zones, we find that schools in Durham are more segregated by race and class as a result of school choice programs than they would be if all students attended their geographically assigned schools. In addition, we find that the effects of choice on segregation by class are larger than the effects on segregation by race.

Private Property, Public Use, and Just Compensation: The Economics of Eminent Domain

The eminent domain clause of the U.S. Constitution concerns the limits of the government's right to take private property for public use. The economic literature on this issue has examined (1) the proper scope of this power as embodied by the 'public use' requirement, (2) the appropriate definition, and implications, of 'just compensation,' and (3) the impact of eminent domain on land use incentives of owners whose land is subject to a taking risk. This essay reviews this literature and draws implications for our understanding of eminent domain law.

Technical Efficiency in Public and Private Sectors in India: Evidence from the Post-Reform Years

While India's state-owned enterprises are widely believed to be inefficient, there is a dearth of studies that document such inefficiency on any rigorous basis. Yet, since improvement in firm efficiency is one of the basic objectives of privatization, it is important to assess whether efficiency is indeed lower in the public sector than in the private sector. This paper compares the performance of state-owned enterprises with those of private sector firms in respect of technical efficiency. The comparison is made in eight different sectors over the period 1991-92 to 1998-99. We measure technical efficiency using the method of Data Envelopment Analysis. Judging by the average levels of technical efficiency, no conclusive evidence of superior performance on the part of the private sector is found.

Free Riders, Holdouts, and Public Use: A Tale of Two Externalities

Free riders and holdouts are market failures that potentially impede the completion of otherwise beneficial transactions. The key difference is that the free rider problem is a demand side externality that requires taxation to compel payment for a public good, while the holdout problem is a supply side externality that requires eminent domain to force the sale of land for large scale projects. This paper highlights that distinction between these two problems and uses the resulting insights to clarify the meaning of the public use requirement of the Fifth Amendment takings clause.

The Political Economy of Constitutional Choice: A Study of the 2005 Kenyan Constitutional Referendum

Recent studies of the linkages between the wealth of nations and the institutions of governance suggest that concentrating political power in a monarchy or a ruling coalition impedes economic growth and, moreover, that while power-diffusing reforms can enhance the wellbeing of society in general, opposition by groups benefitting from the status quo is predictable. In November 2005, Kenyans rejected a proposed constitution that, despite promises made by their new chief executive, would not have lessened the powers of the presidency. Using a unique, constituency-level dataset on the referendum vote, we estimate a model of the demand for power diffusion and find that ethnic groups' voting decisions are influenced by their expected gains and losses from constitutional change. The results also highlights the importance of ethnic divisions in hindering the power-diffusion process, and thus establish a channel through which ethnic fragmentation adversely impacts economic development.

Productivity Growth and Efficiency in Indian Banking: A Comparison of Public, Private, and Foreign Banks

India's public sector banks (PSBs) are compared unfavorably with their private sector counterparts, domestic and foreign. This comparison rests, for the most part, on financial measures of performance, and such a comparison provides much of the rationale for privatization of PSBs.In this paper, we attempt a comparison between PSBs and their private sector counterparts based on measures of productivity that use quantities of outputs and inputs. We employ two measures of productivity: Tornqvist and Malmquist total factor productivity growth. We attempt these comparisons over the period 1992-2000, comparing PSBs with both domestic private and foreign banks. Out of a total of four comparisons we have made, there are no differences in three cases, PSBs do better in two, and foreign banks in one. To put it differently, PSBs are seen to be at a disadvantage in only one out of six comparisons. It is difficult, therefore, to sustain the proposition that efficiency and productivity have been lower in public sector banks relative to their peers in the private sector.

Efficiency and Continuity in Public Finance: The Ottoman System of Taxation

Economic historians have recently emphasized the importance of integrating economic and historical approaches in studying institutions. The literature on the Ottoman system of taxation, however, has continued to adopt a primarily historical approach, using ad hoc categories of classification and explaining the system through its continuities with the historical precedent. This paper integrates economic and historical approaches to examine the structure, efficiency, and regional diversity of the tax system. The structure of the system made it possible for the Ottomans to economize on the transaction cost of measuring the tax base. Regional variations resulted from both efficient adaptations and institutional rigidities.

Ethnicity, Governance and the Provision of Public Goods

Ethnicity is an important institution and one that impacts on the quality of governance. This paper focuses on the behavior of ethnic groups and specifically on their impact on the provision of public goods. The paper shows that ethnic heterogeneity results in under-provision of non-excludable public goods. On the other hand, such societies associate with provision of patronage goods. The paper proposes some areas of research such the economics of ethnic institutions, empirical evidence of the role ethnic groups on public goods provision, tax compliance and institutional reforms to improve governance.