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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. Torsten Persson & Guido Tabellini, 1997. "Political Economics and Macroeconomic Policy," NBER Working Papers 6329, National Bureau of Economic Research, Inc.
  2. Michele Boldrin & Ana Montes, 2004. "The intergenerational state: education and pensions," Staff Report 336, Federal Reserve Bank of Minneapolis.
  3. Giorgio Bellettini & Carlotta Berti Ceroni, 1999. "Is Social Security Really Bad for Growth?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 796-819, October.
  4. Martín Gonzalez-Eiras & Dirk Niepelt, 2005. "Sustaining Social Security," CESifo Working Paper Series 1494, CESifo Group Munich.
  5. 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.
  6. Gradstein, Mark & Kaganovich, Michael, 2003. "Aging Population and Education Finance," CEPR Discussion Papers 3950, C.E.P.R. Discussion Papers.
  7. Persson, Torsten & Tabellini, Guido, 1999. "Political Economics and Public Finance," CEPR Discussion Papers 2235, C.E.P.R. Discussion Papers.
  8. Soares, Jorge, 2005. "Public education reform: Community or national funding of education?," Journal of Monetary Economics, Elsevier, vol. 52(3), pages 669-697, April.
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