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Internal Migrations and Decentralization of Public Investment

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  • Dirk Niepelt

    (SCG, U of Bern, IIES SU, CEPR)

  • Martin Gonzalez-Eiras

    (Universidad de San Andres)

Abstract

We develop a dynamic politico-economic model of public investment where decisions can be made at several levels of government: federal, state, or county. The model predicts that in the absence of internal mobility, the higher level of government would fund all investments that present positive externalities not fully internalized at lower levels. But when there are important internal migrations unrelated to fiscal policy, investments that are embodied - and therefore are useful to citizens if they move to other jurisdictions, like education - are more likely to be funded at the local level than investments that are physically sunk, as infrastructure. Such pattern of migrations and financing is consistent with U.S. data.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 737.

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Date of creation: 2010
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Handle: RePEc:red:sed010:737

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  1. Persson, T. & Tabellini, G., 1997. "Political Economics and Macroeconomic Policy," Papers 630, Stockholm - International Economic Studies.
  2. Martin Gonzalez Eiras & Dirk Niepelt, 2004. "Sustaining Social Security," Working Papers 72, Universidad de San Andres, Departamento de Economia, revised Jun 2004.
  3. Persson, Torsten & Tabellini, Guido, 1999. "Political Economics and Public Finance," CEPR Discussion Papers 2235, C.E.P.R. Discussion Papers.
  4. Michele Boldrin & Ana Montes, 2004. "The intergenerational state: education and pensions," Staff Report 336, Federal Reserve Bank of Minneapolis.
  5. Soares, Jorge, 2005. "Public education reform: Community or national funding of education?," Journal of Monetary Economics, Elsevier, vol. 52(3), pages 669-697, April.
  6. Gradstein, Mark & Kaganovich, Michael, 2004. "Aging population and education finance," Journal of Public Economics, Elsevier, vol. 88(12), pages 2469-2485, December.
  7. Giorgio Bellettini & Carlotta Berti Ceroni, 1995. "Is Social Security Really Bad For Growth?," Working Papers 218, Dipartimento Scienze Economiche, Universita' di Bologna.
  8. repec:wop:bodewp:218 is not listed on IDEAS
  9. William F. Blankenau & Nicole B. Simpson & Marc Tomljanovich, 2007. "Public Education Expenditures, Taxation, and Growth: Linking Data to Theory," American Economic Review, American Economic Association, vol. 97(2), pages 393-397, May.
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