Steven G. Craig

The public sector impact of international resource transfers

Abstract This paper examines the effects of foreign aid on public sector budgets of developing countries. We carefully model the degree of policy leverage which is exercised; this leverage varies considerably among donors. The sources of aid include: the international development banks, the IMF, and bilateral aid agencies. It is found that the form of aid is crucial to an accurate determination of the impact of aid. We find that soft loan aid is quite stimulative, but that the IMF has the greatest impact on recipients. These findings are consistent with theories concerning federal-to-state aid in the U.S.

The deterrent impact of police: An examination of a locally provided public service

Abstract This paper develops and empirically tests a model of crime deterrence in an urban area. There are two important departures from past efforts to study the impact of criminal sanctions. The first is that the provision of sanctions from the local public sector is modeled; this is accomplished by specifying the distributional goals of local government and by specifying the production of safety. The second departure is that actual crime and reported crime are differentiated theoretically and in the empirical work. An empirical test of the model, using a unique neighborhood data set, shows that police deter crime significantly; however, this deterrent impact cannot be demonstrated without the distinction between actual and reported crime.

The impact of congestion on local public good production

Abstract This paper models local public goods production, where allocation of the publicly provided input occurs simultaneously with production of the final service output. The framework models ‘local public goods’ as developed in club theory, where congestion is an increasing function of population. Central to identification of the model is that the quantities of the input (police) are differentiated from the produced output (safety). Estimation is across neighborhoods within a single city. The results show there is a very low elasticity of congestion on average, but safety in some neighborhoods in more congested than private goods.

Chaos Theory and Microeconomics: An Application to Model Specification and Hedonic Estimation

This paper is the first to apply the theory of deterministic chaos to a microeconomic problem. Previous applications of chaos theory to time-series data, while successful in uncovering nonlinearities, have not provided guidelines for resolving uncovered misspecification problems. In contrast, the authors show that a modified test statistic from chaos theory is an extremely valuable tool in microeconomic model specification because it shows when excluded information is correlated with included information. This test, applied to hedonic estimation of marginal housing prices, is able to distinguish among alternative regression specifications and assists in discovering a parsimonious specification devoid of nonlinear effects. Copyright 1991 by MIT Press.

Urban Safety in Vancouver: Allocation and Production of a Congestible Public Good

This paper is a simultaneous exploration of the within-city production of safety with the endogenous allocation of public inputs (police). Three issues are central. One is an examination of the local government allocation function. Second is that safety is specified as a congestible public service consistent with club theory. Finally, the model is estimated using a survey measure of crime. These innovations are due to a unique data set containing observations by neighborhoods in the city of Vancouver. The results are crucial for illustrating crime deterrence, as well as the local public good nature of safety.

General Purpose or Special District Governance? Technical Efficiency versus Rent Dissipation in Airport Finances

This article compares the behavior of special district governments to that of general purpose governments, using as an empirical example the performance of US airports. The authors estimate a modified McFadden symmetric generalized cost function, specified to distinguish technical efficiency and allocative efficiency of airports governed by each institutional form. Using a unique data set on US airports, the authors find that special district governments have technical efficiency that is over 40 percent higher than airports operated by general purpose governments. This advantage, however, is almost entirely dissipated through overpayments to labor and for materials, so that the resulting cost advantage of special district airports is less than 5 percent. The authors interpret these results to suggest that the feedback process between residents and the government institution is centrally important.

The forward and backward flow of technology: the relationship between foreign suppliers and domestic technological advance

Abstract This paper discusses the process of technological flows between countries. In particular, we discuss how technology can flow from the originating country to a foreign country, and how in turn direct foreign investment by the recipient foreign country can return technological advances to the originating country. We apply our discussion to the automobile industry in the US, and present evidence that direct investment by Japanese auto firms, and in particular the pioneering involvement in the US of Honda, has improved the rate of technological advance by US manufacturers.

Policy Interaction in the Provision of Unemployment Insurance and Low‐Income Assistance by State Governments

In this paper we investigate empirical relationships between Unemployment Insurance (UI) and welfare policies using a unique database covering 48 states annually from 1973 through 1989. We first document substantial variation across states in UI program outcomes. Having established that UI is so variable, we explore the simultaneous interaction between UI and Aid to Families with Dependent Children (AFDC), Medicaid, and total state and local welfare spending. Our econometric results indicate substitution between the two cash assistance programs, AFDC and UI, by state governments. On the other hand, states that operate relatively generous UI programs also tend to allocate more resources to Medicaid and other in-kind, low-income assistance programs.

EMPIRICAL POLYCENTRICITY: THE COMPLEX RELATIONSHIP BETWEEN EMPLOYMENT CENTERS

This paper empirically finds that employment subcenters have the expected connections with the central business district, but additionally have important relationships with each other. Using data from Houston, Texas, USA, we use a new proximity measure to estimate a polycentric density function, and show that the estimated gradient using the total derivative, allowing for the relationship between all subcenters, is much different than the gradient using only the own center coefficients. Further, we model asymmetry in the density function by limiting the employment center influence using commuting data, and testing the influence of over-lapping areas for both population and employment. We find significant asymmetry both within, and even outside of the commuting areas. We conclude that subcenters have important linkages to each other in addition to the CBD, and that therefore the polycentric city is more complex than additional centers mimicking the CBD.

State government purchases in a federalist economy

This paper empirically examines the impact of state government purchasing preference laws on expenditures and revenue of individual states. Purchasing preferences allow firms located within a state to win state contracts without being the low bidder. We find that states with purchasing preference laws spend 3% more in real terms per capita than other states. Evidence is found indicating that the preferences require revenue increases to fund them (the tax base does not rise sufficiently), and that there is some apparent taxpayer resistance to these preferences. This evidence is consistent with a coalition model of state government behavior because it indicates there is significant redistribution of income between groups within the state.