Optimal interregional redistribution and local borrowing rules under migration and asymmetric information

Dai, Darong; Liu, Liqun; Tian, Guoqiang

doi:10.1111/jpet.12412

Cited by 8 publications

(5 citation statements)

References 21 publications

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“…Gersbach et al (2021) consider redistribution that maximizes aggregate utility under a different political mechanism-a heterogeneous legislature that bargains over public expenditure. Dai et al (2019) consider two regions in which each government maximizes local welfare with a different discount rate, and show that migration may cause redistribution to occur from impatient to patient regions. Further research that characterizes how such different redistribution rules are linked to economic primitives, such as the endowment 15 In Figure 7c, the position of ( )…”

Section: Discussionmentioning

confidence: 99%

A political foundation of public investment and welfare spending

Villamil

Wang

Ning

2021

J Public Economic Theory

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This paper develops a political economy model to examine the implications of political selection under an authoritarian regime. We formalize the fiscal policy choice of local governments, focusing on two political selection mechanisms and their implications for public investment and welfare spending. A growth-oriented promotion system induces local officials to increase public investment, which may increase output but crowd out welfare transfers. This mimics the recent investment-driven growth in China and relatively low effort to tackle high inequality. Under a broader incentive structure, we show that it is possible for an authoritarian regime to attain the social welfare of a democracy. | INTRODUCTIONOne of the most intriguing problems in public economics is how government spending can be used to achieve socioeconomic objectives. Political institutions and politicians' incentives have significant impact on the allocation of public revenue and thus have huge implications for GDP, in both democracies (e.g.,

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Section: Discussionmentioning

confidence: 99%

A political foundation of public investment and welfare spending

Villamil

Wang

Ning

2021

J Public Economic Theory

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“…Scientists (Dai et al, 2022) have analyzed optimal interregional redistribution and local budget rules. The article examines whether a contributing redistributive region should face fewer borrowing constraints than a recipient region.…”

Section: Literature Reviewmentioning

confidence: 99%

The role of budgets in strengthening the financial base of local self-governments

et al. 2022

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The purpose of this study was to justify the role of local budgets in strengthening the financial base of local self-government in modern conditions of social development, oriented to the processes of democratization and decentralization of political power. The research methodology used was an integral approach, which allowed investigating the role of local budgets in strengthening the financial base of local self-government from an economic, organizational and legal point of view. A comprehensive approach allows to systematically address the definition of the role of local budgets and to highlight their specific characteristics. It is concluded that, scientifically identifying the various aspects of the functioning of local budgets allowed to distinguish their essence from the point of view of combining organizational, economic and legal approaches to, at the same time, consider them as a multifunctional system of financial, economic, legal and social relations, which provides for the possibility of redistribution of income due to the creation and use of monetary funds of the authorities of local authorities, to meet the public needs of the population and sustainable development of the territories.

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“…Extensions of the basic incentive theory have addressed the impact of the agent’s information status on the design of the contracts (Lewis and Sappington, 1991a; Sobel, 1993; Cremer and Khalil, 1992; Cremer et al , 1998a, b; Huber and Runkel, 2008; Herold, 2009; Huang et al , 2014; Dai et al , 2018, to name a few). Lewis and Sappington (1991a) and Sobel (1993) examine the principal’s preference over the amount of information acquired by an agent.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The literature of optimal grants under asymmetric information has been growing rapidly. Some examples include Bordignon et al (2003), Boadway et al (1999), Bucovetsky et al (1998), Cornes and Silva (1996), Cremer et al (1996), Raff and Wilson (1997), Huber and Runkel (2008), Herold (2009), Huang et al (2014) and Dai et al (2018). However, none of them study the issue of information acquisition by the government.…”

Section: Literature Reviewmentioning

confidence: 99%

Information acquisition and funding for public service agencies: imperfect categorizing

Zeng

Lin²

2019

JEAS

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Purpose The purpose of this paper is to explore the impact of information acquisition for the purpose of differentiating agencies operating in different localities on the design of optimal funding. Design/methodology/approach This paper is a theoretical study. The focus is on a situation in which agencies providing public services have perfect private information about their cost conditions before the government sets the formula for funding. Findings The authors show that, using a free signal correlated with costs of operation to differentiate agencies situated in different localities, the government can achieve better welfare for households across regions. However, when there exist non-negligible costs involved in the differentiating process, it may pay to acquire information only if the signal acquired is informative enough, i.e., the correlation between the signal and the agencies’ true cost conditions is strong enough. Social implications This paper is of interest to academics and policy makers. Acquiring information for tagging can be viewed as a preliminary screening process. Different types are then endowed with distinctly different incentives to control the costs of operating their agencies. Specifically, when the observed cost signal and the true cost conditions of agencies are positively correlated, the government should optimally be more aggressive in distorting the high-cost type’s effort decision by giving less incentive for the low-cost type agencies to cut costs than in the no-differentiation case, and vice versa. Originality/value This paper is the first study that explores the impact of information acquisition on the design of optimal funding for public service agencies.

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Optimal interregional redistribution and local borrowing rules under migration and asymmetric information

Cited by 8 publications

References 21 publications

A political foundation of public investment and welfare spending

A political foundation of public investment and welfare spending

The role of budgets in strengthening the financial base of local self-governments

Information acquisition and funding for public service agencies: imperfect categorizing

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