Robert T. Deacon

A Demand Model for the Local Public Sector

IN recent years there have been notable advances in the methodology used in empirical studies of state and local public spending. The rather ad hoc econometric studies of the mid-1960s are being replaced by more carefully specified models, e.g., Barr and Davis (1966), Ohls and Wales (1972), Borcherding and Deacon (1972), and Bergstrom and Goodman (1973). Most of these efforts share the common feature that expenditures are viewed as responses to collectively exercised demands. While these studies have yielded insights, all have been partial equilibrium in nature and none has incorporated the possibility of substitution among public services in response to changes in relative costs. A goal of the present paper is to fill this gap by directly modeling and estimating such substitution effects in collective consumption. To accomplish this, it is convenient to view expenditure decisions in the public sector as analogous to consumer choices in the private sector, i.e., as if generated by utility maximization subject to a budget constraint. Quite aside from any advantages this approach holds for empirical analysis, this view of the public decision-making process has been highly attractive to theoretical researchers. Although the utility maximization paradigm has never been subjected to a direct empirical test, it has been employed to predict the effects of intergovernmental grants and spillovers across jurisdictions, and to examine other topics. A second aim of this analysis, therefore, is to provide empirical evidence on the tenability of this view of the local public sector.

Research Trends and Opportunities in Environmental and Natural Resource Economics

The research questions and topics most likely to emerge in the near term future are assessed. A common theme is that policy issues will be an important driving force, as has generally been true in the past. More specifically, future theoretical advances are expected to occur in the treatment of uncertainty, the incorporation of stock service flows into natural resource analysis, and the incorporation of institutional considerations into models of resource exploitation. Research on valuation is expected to remain vigorous, primarily in the testing of basic assumptions and reconciliation of existing inconsistencies. Opportunities in renewable resource economics center on the incorporation of richer behavioral and technological detail in the general frameworks that already exist. A better understanding of what drives technology, and how environmental agreements can be negotiated and enforced among sovereign nations, are two topics likely to shape future research on global externalities. Finally, questions related to spatial aspects of natural resource use, and matters of land use more generally, seem likely to emerge as important topics on the professions future research agenda.

Fishery Management by Harvester Cooperatives

Managing fisheries by delegating authority to an association of users, often organized as a cooperative, is gaining increased attention as a strategy for implementing rights-based reform. Assigning rights to groups rather than individuals can facilitate coordination and collective action and enable efficiency gains similar to those achieved when a firm organizes inputs centrally. Evidence from developed country fisheries managed by cooperatives indicates that coordination gains can be substantial. Furthermore, these gains often take forms overlooked in the traditional fishery reform literature, including those from enhanced product recovery and quality, improved spatial and temporal deployment of effort, and reduced environmental damage. In developing countries, assigning management responsibility to user groups can facilitate user-based provision of public goods in situations where governments do not function well. Developing country fishery cooperatives commonly provide monitoring and enforcement of access limitations, limits on fishing effort, and actions to conserve shared stocks. This article reviews empirical evidence on the performance of fishery cooperatives in developed and developing countries. A key conclusion is that using a combination of rights-based instruments can achieve efficiencies that cannot be captured by any single instrument.

The Political Economy of the Natural Resource Curse: A Survey of Theory and Evidence

This survey focuses on political economy theories of the resource curse and scrutinizes how well, or poorly, these theories have been integrated with empirical work. One reason why this integration is important lies in the practical importance of pinning down the causal links involved in the resource curse. A second reason for focusing on integration of theory and empirics is that the resource curse is a potentially fruitful venue for testing political economy theories generally.

Is the environmental Kuznets curve an empirical regularity

The empirical literature on the environmental Kuznets curve (EKC) purports to describe how a nation’s environmental quality will evolve if it makes the transition from poverty to wealth. The popular generalization is that pollution will first increase and then, if income becomes sufficiently high, decline. Empirical support for this proposition is based primarily on cross-country variations in income and pollution rather than evidence on the behavior of individual countries over time. We examine a recently available data set on SO2, smoke, and particulate air pollution to look for examples of countries following the EKC process. For most pollutants the income-pollution pattern does not differ from what would be expected to occur by chance. According to the EKC hypothesis, the driving force in the worldwide decline in air pollution is growth in income. To check the plausibility of this explanation, we estimate country-specific income elasticities for clean air that are implied by the EKC framework. We find them to be implausibly large relative to other estimates in the literature. We suggest an alternative hypothesis, that public support for environmental protection increased dramatically around 1970, sparking increased efforts to improve environmental quality. Cleanup was faster in rich countries than in poor, however. The record of within-country air pollution trends is broadly consistent with this story.

Public Good Provision by Dictatorships: A Survey

All dictatorships provide public goods, but levels of provision generally differ from those found in otherwise similar democracies. Some theoretical treatments of this phenomenon emphasize differences in the degree of monopoly power enjoyed by dictators versus leaders of governments, while others stress differences in the size of the group a dictatorial versus democratic government leader must satisfy in order to remain in office. Empirical analysis is still at an early stage and has been oriented mainly toward determining the magnitude of the governance effect on public good provision, rather than devising tests that would distinguish between alternative theories of dictatorial behavior. While the empirical record is far from unanimous, the weight of evidence indicates that dictatorships under-provide public goods relative to democracies and that the estimated effects are both large in magnitude and statistically significant. JEL Classifications: H1, D72, H11

An empirical model of fishery dynamics

Abstract The multiple-cohort approach to population dynamics is seldom used for empirical analysis of catch and effort data due to the complexity of the resulting models and to limitations on available data. The present paper addresses these problems by adopting a discrete time framework and simplifying assumptions for growth, mortality, and recruitment. The result is a readily estimated econometric model of the commercial catch that is consistent with the multiple-cohort paradigm. This model is applied to catch and effort data for the California abalone fishery and the estimates obtained are used to analyze policy.

Reforming Fisheries: Lessons from a Self-Selected Cooperative

We analyze a policy experiment in an Alaskan commercial fishery that assigned a portion of an overall catch quota to a voluntary co-op, with the remainder exploited competitively by those choosing to fish independently. Unlike the individual quota system advocated by many economists, the policy encouraged coordinated fishing and did not require a detailed assignment of rights. We model the decision to join and behavior under cooperative and independent fishing. The data confirm our key predictions: the co-op attracted the least skilled fishermen, consolidated and coordinated effort among its most efficient members, and provided shared infrastructure. We estimate that resulting gains in rent were at least 33 percent. Some independents were disadvantaged by the co-op’s formation, however, which prompted them to oppose it in court. We analyze the source of their disadvantage and provide guidance for designing fishery reform that leads to Pareto improvements, enabling reform without losers.

Price controls and rent-seeking behavior in developing countries

Abstract When the price of a good is controlled, a nonprice allocation rule must necessarily be substituted for allocation by price. Examples are first come-first served allocation, which gives rise to rationing by waiting, and allocation by an explicit system of ration coupons. With rationing by waiting, consumers are induced to pursue activities that economize on waiting costs, such as buying a larger quantity per purchase. Although such responses are individually rational, they are socially self-defeating in the sense that they lower equilibrium consumer welfare. Rationing by coupons can avoid some, but typically not all, of these losses. These ideas are developed with examples of model economies, and their practical relevance is illustrated with evidence from developing countries.

Rent seeking and the resource curse

Many countries receiving natural resource windfalls suffer from slow growth, low incomes and weak political institutions, an empirical regularity dubbed the resource curse. Patterns in the data suggest a political link is involved: some countries escape this fate, those that succumb generally have weak institutions initially, and a curse is most likely when the resource is spatially concentrated. Rentseeking for a resource prize is a prominent theme in theoretical explanations of the curse. While the precise mechanisms vary, several postulate that rent-seeking diverts activity or resources away from productive employment, e.g., private capital may be shifted to a less productive but secure sector, potential entrepreneurs may be attracted into rent-seeking rather than wealth creation, labor may be diverted away from producing output and toward competing for a resource rent prize. While empirical results remain somewhat controversial, there is now extensive evidence supporting both the curse and a political transmission channel. Three aspects of this work are particularly important for rent-seeking: (i) political theories of the resource curse consistently predict more than 100 percent dissipation of the resource windfall, a finding at odds with theoretical treatments of rentseeking; (ii) variations in pre-windfall political institutions can magnify, moderate of overturn the resource curse effect; and (iii) a resource windfall can alter the quality of political institutions.