Vertical Grants and Local Public Efficiency
Ivo Bischoff, Peter Bönisch, Peter Haug, Annette Illy
Abstract
This paper analyses the impact of vertical grants on local public sector efficiency. First, we develop a theoretical model in which the bureaucrat sets the tax price while voters choose the quantity of public services. In this model, grants reduce efficiency if voters do not misinterpret the amount of vertical grants the local bureaucrats receive. If voters suffer from fiscal illusion, i.e. overestimate the amount of grants, our model yields an ambiguous effect of grants on efficiency. Second, we use the model to launch a note of caution concerning the inference that can be drawn from the existing cross-sectional studies in this field: Taking into account vertical financial equalization systems that reduce differences in fiscal capacity, empirical studies based on cross-sectional data may yield a positive relationship between grants and efficiency even when the underlying causal effect is negative. Third, we perform an empirical analysis for the German state of Saxony-Anhalt, which has implemented such a fiscal equalization system. We find a positive relationship between grants and efficiency. Our analysis shows that a careful reassessment of existing empirical evidence with regard to this issue seems necessary.
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Grant Dependence, Regulation and the Effects of Formula-based Grant Systems on German Local Governments: A Data Report for Saxony-Anhalt
Peter Haug
IWH Discussion Papers,
No. 2,
2013
Abstract
Recent empirical studies have found – seemingly − efficiency-enhancing effects of vertical grants on local public service provision. The main purpose of this paper is to prepare an elaborate theoretical and empirical analysis of these contradictory results. Therefore, it investigates if certain fiscal and institutional conditions (fiscal stress, fiscal rank-preserving vertical grant systems, input- and output regulation), that might help to explain these empirical findings, are characteristic of at least some parts of the local government sector or certain regions. The German state of Saxony-Anhalt is chosen for case study purposes. The main results are: First, the local governments suffer from severe fiscal problems such as high grant dependency, low tax revenues and the prevalent inability to finance investments by own resources. Second, the output- and input-regulation density of certain mandatory municipal services (schools, childcare facilities, fire protection) is high. Finally, the most important vertical grant category for local governments, the formula-based grants (“Schlüsselzuweisungen”), can be described as mainly exogenous, unconditional block grants that in most cases preserve the relative fiscal position of the grant recipients.
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Methods and Problems of Regional Economic Projections
Maike Irrek, Oliver Holtemöller
Flächennutzungsmonitoring IV. Genauere Daten – informierte Akteure – praktisches Handeln. IÖR-Schriften 60,
2012
Abstract
Regional economic projections are fundamental for political decision-making in several fields, including land use. Residential as well as commercial land use is affected by regional economic growth. This article describes the methodology and problems of regional economic projections using the example of a medium and long-term projection model for the economic development in Germany and the German states. The model utilizes the production function approach and updates the factors of production, labor and capital, as well as productivity via time series econometric methods. The results for Germany as a whole show that gross domestic product will continue increasing during the time period of 2011 to 2025 despite the demographically caused decline of hours worked. However, the varying forms of demographic change in the German states will lead to regional growth differentials. This is exemplified by a comparison between Saxony and Baden-Württemberg.
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Federal grants for local development to stop economic decline? – Lessons from Germany
Peter Haug, Martin T. W. Rosenfeld
Consequences of the International Crisis for European SMEs – Vulnerability and resilience. Routledge Studies in the European Economy, Routledge,
2012
Abstract
The chapter analyses theoretically and empirically the supply-side effects of the public investments funded by the German „Economic Stimulus Package II“(Konjunkturpaket II), which was implemented in 2009. In the theoretical part, we address the distortionary effects of investment grants on public capital provision and local economic development. According to the theoretical literature on the efficient provision of public goods, public inputs and economic growth, conditional investment grants have several negative allocation effects: First, they distort the relative factor prices for the local government stimulating excess public capital stocks and Pareto-inefficient provision of public goods. Second, long-term growth-enhancing effects of debt-financed public investment could only be expected for public inputs, which either directly increase the productivity of the private sector or increase factor productivity, especially by increasing the stock of human capital. In the empirical part, we find that despite of the recent increase in municipal investments in the German state of Saxony our regression results do not confirm a connection with the ESPII funds. Furthermore, no relationship between the municipal fiscal strength and the amount of ESPII grants received could be found. All in all, due to the focus of the grants on public consumption goods rather than public inputs only marginal future growth effects can be expected from the subsidized investments.
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New Energies in Peripheral Areas - Creation and Development of Photovoltaic Industry in Freiberg, Saxony
Matthias Brachert, Christoph Hornych
D. Keppler, B. Nölting, C. Schröder (Hrsg.), Neue Energie im Osten - Gestaltung des Umbruchs, Perspektiven für eine zukunftsfähige sozial-ökologische Energiewende,
2011
Abstract
The article describes the transformation of the economy in Freiberg from the East German semiconductor industry to today's photovoltaic industry. The role of the local and regional framework for this development is shown.
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Municipality Size and Efficiency of Local Public Services: Does Size Matter?
Peter Bönisch, Peter Haug, Annette Illy, L. Schreier
IWH Discussion Papers,
No. 18,
2011
published in: FinanzArchiv
Abstract
Similarly to western Germany in the 1960s and 1970s, the eastern part of Germany has experienced a still ongoing process of numerous amalgamations among counties, towns and municipalities since the mid-1990s. The evidence in the economic literature is mixed with regard to the claimed expenditure reductions and efficiency gains from municipal mergers. We therefore analyze the global efficiency of the municipalities in Saxony-Anhalt, for the first time in this context, using a double-bootstrap procedure combining DEA and truncated regression. This allows including environmental variables to control for exogenous determinants of municipal efficiency. Our focus thereby is on institutional and fiscal variables. Moreover, the scale efficiency is estimated to find out whether large units are necessary to benefit from scale economies. In contrast to previous studies, we chose the aggregate budget of municipal associations (“Verwaltungsgemeinschaften”) as the object of our analysis since important competences of the member municipalities are settled on a joint administrative level. Furthermore, we use a data set that has been carefully adjusted for bookkeeping items and transfers within the communal level. On the “eve” of a mayor municipal reform the majority of the municipalities were found to have an approximately scale-efficient size and centralized organizational forms (“Einheitsgemeinden”) showed no efficiency advantage over municipal associations.
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Daseinsvorsorge und demographischer Wandel in peripheren Räumen. Wie gehen die Betroffenen mit dem Ausdünnen sozialer Infrastruktur um?
Ulrich Blum, Gerhard Heimpold, Walter Hyll, Franziska Jungermann, Lutz Schneider
K. Friedrich (Hrsg.), Zukunftsgestaltung im demographischen Umbruch. Schriftenreihe des WZW Nr. 07. Wissenschaftszentrum Sachsen-Anhalt: Lutherstadt Wittenberg,
2011
Abstract
The article is part of a booklet edited by the Centre for Science Saxony-Anhalt - the Expert Platform “Demographic Change”. The booklet provides an overview on 15 research projects funded by the ministry of education of Saxony Anhalt. The IWH project analyzes aspects of demographic change in peripheral regions by means of Saxony Anhalt. In particular, the IWH research focus is on how citizens in peripheral regions will behave if the provision with social services of public interest is reduced. The article provides findings on the impact of primary schools closures on demographic change.
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Size is not everything – The efficiency of municipal service provision in Saxony-Anhalt
Peter Haug, Annette Illy
Wirtschaft im Wandel,
No. 10,
2011
Abstract
The proponents of municipal area reforms – e.g. the recently completed reform in Saxony-Anhalt – expect that municipal amalgamations or centralized organizational forms save costs or increase the efficiency of local public service provision. This article examines the potential efficiency deficits of Saxony-Anhalt´s fragmented municipal structures on the eve of the crucial phase of the municipal reform. The results of a two-step DEA bootstrap procedure show that decentralized municipalities (“Verwaltungsgemeinschaften”) do not have to be significantly less efficient than centralized municipalities (“Einheitsgemeinden”). Furthermore, the results of the scale efficiency analysis suggest that the majority of Saxony-Anhalt´s communities already had an approximately efficient “firm size” – if the aggregated level of the municipal associations is examined. The relationship between scale efficiency and population is U-shaped. On the one hand, the results do not support the preservation of micro-municipalities or the formation of municipal associations with more than ten members. On the other hand, the results provide also no evidence for the necessity to reduce the number of towns and municipalities in Saxony-Anhalt from 1118 in 2004 to currently 219 – even if the looming population decline is taken into account.
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A Systemic View on Knowledge-based Development Metrics
Mirko Titze, Michael Schwartz, Matthias Brachert
International Journal of Knowledge-Based Development,
No. 1,
2012
Abstract
Drawing on the systems perspective of innovation processes, this article proposes a conceptual approach for a comprehensive analysis of regional knowledge generation and transfer. Instead of focusing on one single indicator, the approach emphasizes the importance to take multiple channels of knowledge transfer into account. This provides valuable insights into the spatial structure of innovation processes on different levels. We disentangle the innovation process and consider four different layers: i.) publications in peer-reviewed journals, ii.) patent applications, iii.) formal R&D collaboration projects, the iv.) localized input-output relations. Further, we demonstrate the relevance of the „multi-layer approach‟ by applying it empirically to a specific regional innovation system: The Free State of Saxony – a federal state in Germany. We argue that the approach could be a valuable tool to inform policy-makers about knowledge-based regional development strategies.
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Selektivität, soziale Bindung und räumliche Mobilität - Eine Analyse der Rückkehrpräferenz nach Ostdeutschland
Lutz Schneider, Alexander Kubis, D. Wiest
Zeitschrift für Wirtschaftsgeographie,
No. -1,
2011
Abstract
Selectivity, social ties and spatial mobility. An analysis of preferences for return migration to East Germany. In the public debate, brain drain from East Germany is supposed to be the most critical trend regarding the development and catching up of the New Länder. Therefore, potential for in- and re-migration has attracted much attention at least in the political context. Our contribution analyses the remigration potential on basis of data from a DFG research project focussing on the re-migration intentions of people formerly emigrated from Saxony-Anhalt. The analysis concentrates on the following aspects: the effect of job market success after emigration; the impact of social ties to the origin and the host region and on the selectivity of re-migration preferences. The econometric results confirm several expected effects: On the one hand an individual’s job market success reduces the intention to return. Likewise, the re-migration preference increases for people whose expectations were disappointed. On the other hand, the relevance of social ties to the origin region for re-migration dispositions is confirmed by the estimations. Yet, regarding selectivity of re-migration preferences in terms of human capital econometric results are somewhat ambiguous.
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