Thomas Romer

Bureaucrats Versus Voters: On the Political Economy of Resource Allocation by Direct Democracy

I. The setters problem under certainty and the importance of the reversion point, 565.—II. Budget-maximizing with uncertain turnout, 571.—III. Exploiting a sequence of elections, 579.—IV. Implications for empirical research, 581.—Appendix, 585.

Mobility and Redistribution

The ability of individuals to move freely from one jurisdiction to another is generally seen as a constraint on the amount of redistribution that each jurisdiction within a system of governments can undertake. In this paper, we look at this proposition by developing a positive analysis of income redistribution by local governments in a federal system. We ask how much redistribution occurs when only local governments can have tax/transfer instruments, individuals can move freely among jurisdictions, and voters in each jurisdiction are fully aware of the migration effects of redistributive policies. Local redistribution is shown to induce sorting of the population, with the poorest households located in the communities that provide the most redistribution. While the threat of out-migration affects the potential for redistribution, our results suggest that significant local redistribution is nonetheless feasible. Numerical computations indicate that the proportion of residents who are renters is a major factor affecting the local choice of level of redistribution.

The Elusive Median Voter

Abstract While some political scientists have maintained that politics has little, if anything, to do with governmental output, economists have looked at expenditures as reflecting median voter outcomes. They have used the median voter framework extensively, both in theoretical work and in empirical analysis. This paper reviews the empirical work, concluding that the studies fail to indicate that actual expenditures correspond in general to those desired by the median voter. The economic studies fail to identify whether expenditures are at the level desired by the median voter or at some multiple of this level. They also fail to identify whether the median voter is pivotal or a voter at some other fractile is pivotal. Moreover, the basic median voter model is rarely tested against competing theoretical or statistical models. In some studies parameter estimates are not consistent with the theoretical model designed on the basis of the median voter hypothesis. The economic studies suggest that expenditures depend not only on the preferences of voters but also on the structure of political institutions. The presence of bureaucratic threats is offered as an institutional setting that can result in expenditures significantly in excess of those desired by the median voter.

Equilibrium among local jurisdictions: toward an integrated treatment of voting and residential choice

Abstract In models of local public goods with mobile consumers, existence of equilibrium is problematic. Difficulties with existence of equilibrium that arise in models with discrete locations and in models with voting are compounded when both features are introduced into the same model. We present conditions under which equilibrium exists in a model where freely mobile households choose community of residence and amount of housing consumption, and vote on the level of public goods provision. These conditions involve restrictions on preferences and the technology of public goods supply. At least some of these conditions appear consistent with empirical observations. We discuss the implications of the conditions, and their role in assuring existence of equilibrium. A series of computational examples provide illustrations of the way these conditions interact, and the difficulties that must be confronted if they are to be relaxed.

Interjurisdictional Sorting and Majority Rule: An Empirical Analysis

The goal of this paper is to provide a comprehensive empirical analysis of majority rule and Tiebout sorting within a system of local jurisdictions. The idea behind the estimation procedure is to investigate whether observed levels of public expenditures satisfy necessary conditions implied by majority rule in a general equilibrium model of residential choice. The estimator controls for observed and unobserved heterogeneity among households, observed and unobserved characteristics of communities, and the potential endogeneity of prices and expenditures, as well as the self-selection of households into communities of their choice. We estimate the structural parameters of the model using data from the Boston Metropolitan Area. The empirical findings reject myopic voting models. More sophisticated voting models based on utility-taking provide a potential explanation of the main empirical regularities.

Existence of voting and housing equilibrium in a system of communities with property taxes

Abstract Considerable attention has recently been devoted to general equilibrium analysis of local public good allocation in a system of jurisdictions. While there are differences in approach and emphasis, all the models with a substantial degree of generality essentially ignore political processes for allocating local public goods. It is fairly clear from these models, however, that - at least for the time being - explicit modeling of the political process will require imposing more structure on the economics of the model. The framework of this paper forgoes the generality of the ‘apolitical’ models in order to be able to consider both economic and political aspects of the problem. We develop a formal model of a continuum of non-identical individuals, in which each individual must choose among a finite number of communities. In each community, the provision of the public good is financed by taxing residents on the amount of housing they choose to consume. The tax rate and amount of public good supplied in the community are determined by a vote of residents of the community. An equilibrium is said to exist whenever individuals are located in communities such that each community is populated and it is in an ‘internal equilibrium’, and no individual would become better off by migrating to a different community. Standard restrictions on individual preferences are not sufficient to guarantee the existence of an equilibrium with an arbitrary number of communities. In order to ensure existence, fairly severe assumptions must be placed upon individual preferences and technology. We develop these restrictions, and prove existence of equilibrium.

Asymmetric information and agenda control: The bases of monopoly power in public spending☆

Abstract A pervasive empirical finding, widely known as the ‘flypaper effect’, is that lump-sum intergovernmental grants generate considerably greater public spending by the recipient jurisdiction than would be predicted by equivalent shifts in personal income in that jurisdiction. Moreover, such observations are inconsistent with standard median voter models of the political process. We posit a model in which it is in the interest of suppliers of a collectively provided good not to generate full information to voters about outside aid. The empirical results are consistent with ‘flypaper’ and suggest that voters are very poorly informed about outside grants.

An Empirical Investigation of the Dynamics of PAC Contributions

We study the extent to which PACs target the members and chairs of particular congressional committees, by estimating the effects of changes in a representatives committee and leadership assignments on changes in the pattern of PAC contributions received by the representative. We find strong evidence that ties exist between certain types of PACs and congressional committees. In addition, the analysis reveals interesting asymmetries in the propensity of PACs to add or drop members who change their committee assignments.

Ideology, “shirking”, and representation

In theory, republican government arises from the fact that the citizens are too numerous to be gathered in one place to make decisions. From the larger number a smaller number must be chosen and given the power to make decisions. How the small number should decide is the question of representation, and this question has been a central concern of public choice from the field’s earliest days.1 Most of the work has dealt with elucidating how different ways of structuring legislatures and elections affects the diversity of interests that can be represented. Much of this research has treated the representative fairly mechanically, assuming that he somehow embodies the preferences of his electorate.

Community development with endogenous land use controls

Abstract When competitive landowners/developers control incorporation and zoning decisions, efficient patterns of development emerge. When, by contrast, early arrivals control policy, they may impose zoning restrictions that force later entrants to pay, via the property tax, a disproportionate share of the cost of providing public services. If new arrivals are sufficiently poor, they may choose to reside outside the community while higher-quality land within the community remains unoccupied. This inefficient and exclusionary outcome can be an equilibrium. If boundaries, once drawn, are irreversible, the ex ante introduction of a seemingly natural compensation scheme may not remedy the problem.