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Internal Migrations and Decentralization of Public Investment

Author

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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.

Suggested Citation

  • Dirk Niepelt & Martin Gonzalez-Eiras, 2010. "Internal Migrations and Decentralization of Public Investment," 2010 Meeting Papers 737, Society for Economic Dynamics.
  • Handle: RePEc:red:sed010:737
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    References listed on IDEAS

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    1. Gradstein, Mark & Kaganovich, Michael, 2004. "Aging population and education finance," Journal of Public Economics, Elsevier, vol. 88(12), pages 2469-2485, December.
    2. Michele Boldrin & Ana Montes, 2005. "The Intergenerational State Education and Pensions," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 651-664.
    3. repec:fth:prinin:334 is not listed on IDEAS
    4. Martin Gonzalez-Eiras & Dirk Niepelt, 2004. "Sustaining Social Security," 2004 Meeting Papers 199, Society for Economic Dynamics.
    5. Janice Bell, 2001. "The Political Economy of Reform in Post-Communist Poland," Books, Edward Elgar Publishing, number 1810.
    6. 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.
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