In this essay, we survey the literature on local public finance. The first part deals with the normative theory of local public finance, starting from the question when it is beneficial to decentralize public services. We then analyze the functioning of a system of competitive jurisdictions in the spirit of Tiebout. The final part of the essay deals with constitutional design. In particular, we ask when and how local governments have to be regulated in order to prevent destructive competition or contain monopoly power, and we describe which institutions might perform these tasks.
In this issue of Clinical Infectious Diseases, Petti and colleagues [1] highlight the need for increased investment in laboratory services to avoid compromising patient care. Health care professionals are waking up to the realization that the development of new drugs and treatment strategies has far outstripped the ability of health care systems to deliver them to individuals who need them. The decision has been made by leading global health care funders that cost should not be a deterrent to providing effective treatment, even in the poorest countries. As a result, there are major drives to rapidly increase availability of antiretroviral drugs and antimalarial combination therapies. A similar and potentially stronger argument for prioritizing effectiveness over cost pertains to the provision of accurate frontline diagnostic services. Yet, as Petti and colleagues [1] illustrate, there is widespread use of “empiricism without laboratory support for diagnosing disease” in sub-Saharan Africa, which would not be tolerated in resource-plenty countries. What can be done to redress the imbalance and bring investments in diagnostics to a level that will support cost-effective deployment of available treatment regimens in sub-Saharan Africa? Let us consider how this might be achieved by exploring opportunities within the major areas of concern discussed by Petti et al. [1]: clinical misdiagnosis, inadequate health care infrastructure, and laboratory capability and diagnostic accuracy. Almost none of these opportunities can be realized by laboratory services in isolation; they depend on close partnerships between technical and clinical professionals and local and national health care managers. For many common infections in sub-Saharan Africa, including severe and nonsevere malaria and septicemia, clinical diagnosis is not adequately sensitive or specific. Because malarial and bacterial infections share similar presenting features, syndromic management [2] results in overtreatment of both conditions, increasing the expense and threatening the longevity of the limited repertoire of inexpensive antimicrobials. Often, frontline medical personnel have to make immediate clinical decisions on the basis of a limited number of diagnostic tests. Equally important are the refinement of this initial diagnosis and the targeting of therapies over the ensuing hours and days, which is greatly facilitated by good diagnostic facilities; thus, the laboratory is the most important determinant in this process. Ideally, rapid and accurate diagnostic testing would be available at the first consultation, to enable personnel to make the correct diagnosis and to avoid the waste of resources and increased ill health associated with incorrect initial diagnoses. In some cases, such diagnostic tools are available but are not in routine use, because they are considered to be too expensive or because they have not been adequately evaluated in real-life situations. Such tools include rapid dipstick malaria tests, anemia and HIV tests, and fingerprick hemoglobinometric tests. Much more investment is needed to evaluate and adapt existing tools and to develop new diagnostic approaches for common conditions. This is likely to be most effectively achieved through partnerships between researchers, policy makers, and commercial companies that are similar to the programs that have been used for drug development (e.g., Medicines for Malaria Venture). The availability of such diagnostic tools is not likely to greatly impact clinical care unless their use is underpinned by evidence-based guidelines that are implemented, supervised, audited, and embedded within local practice. The process of producing guidelines is based on the synthesis of published evidence from diverse sources and then adaptation to suit local circumstances, and it needs to involve collaboration between clinicians and laboratory professionals. A proposal to simplify the complex process of guideline development has been proposed recently by Raine et al. [3]. Laboratory services are one of the most neglected areas of health care provision in sub-Saharan Africa and are disproportionately affected by the staff shortages, poor communications, inadequate equipment, low morale, and lack of training that impinge on all those involved in delivering health care in poorer African countries. The reforms currently underway in the health care sector in many sub-Saharan African countries and the consequent decentralization of planning and financing could be used as an opportunity for laboratory services to move up on the priority list of essential services. This will only happen if laboratories represent themselves on key decision-making bodies, rather than being represented by other sections of health care services, such as pharmacy. Within top-level management, the voice of clinicians is generally much more powerful than that of laboratory professionals. Clinicians therefore have a responsibility to support and advocate for their technical colleagues in the laboratory service, to ensure that they are involved in decisions affecting the laboratory at all levels, and to promote, facilitate, and demand high-quality and responsive laboratory support for effective patient care. The fact that a test was done by a senior technician or that it was performed on a sophisticated piece of equipment in no way guarantees the accuracy of the results. Establishing, maintaining, and demonstrating the accuracy of diagnostic tests is a major challenge for most laboratories in sub-Saharan Africa. To do this, they need to have the skills and resources to institute regular internal quality checks for each test, reliable documentation processes, and access to an external reference center that is itself linked to and accredited by international quality-assessment networks. Laboratories must be able to show that they perform well in such an external quality-assessment scheme before clinicians can be confident that the results of tests they request will be accurate. The complexity and cost of setting up and maintaining such a quality-assurance system means that only a very few laboratories, almost exclusively those that are tertiary or privately owned, can provide evidence that their results are accurate. There are a few examples of innovative local schemes for simple external quality checks on key laboratory tests—for instance, sending blood samples, malaria slides, or sputum smears for tuberculosis diagnosis to neighboring laboratories and then meeting regularly to compare results and to reflect on any discrepancies. In addition, there are particularly good examples of local quality-assurance systems designed to evaluate testing in tuberculosis control programs that could be expanded to include the malaria test (another microscopy-based test) and further extended to other essential laboratory investigations, such as hemoglobin and transfusion-related tests. Even these local schemes require a high degree of motivation and organization by the laboratory staff, as well as support from clinicians and regional or national health care managers. Qualityassurance networks are one of the areas in which nongovernmental organizations and the private sector could play a much greater role, particularly in places where governmental health care systems are ineffective or dysfunctional. Outsourcing external quality assessment to such agencies would bring many mutual benefits, especially because many of the public-sector laboratory staff also work in the private sector. The current international focus on rapidly widening the access to antiretrovirals can be perceived as either a threat to or an opportunity for laboratory services in sub-Saharan Africa. It is a potential threat because strong vertical programs concerned with HIV care and management focus on the HIV-related aspects of laboratory services, thereby fragmenting the service and diverting scarce resources, particularly human resources, away from important non-HIV tests, such as those for malaria, anemia, and tuberculosis. On the other hand, if laboratory aspects of HIV programs are able to integrate into and strengthen existing systems, they will provide a unique opportunity to build the capacity of long-neglected laboratory services in sub-Saharan Africa. It is very surprising that the article by Petti et al. [1], which is wholly concerned with the provision of laboratory services in sub-Saharan Africa, does not include an African author. Is this indicative of the dearth of indigenous laboratory advocates in sub-Saharan Africa? As treatment costs for common conditions increase in poorer countries, the balance must shift away from syndromic management toward achievement of specific diagnoses. Laboratory services will have an increasingly important role to play in improving the quality and effectiveness of patient care, but, to do this, laboratories and their advocates need to be given a much louder voice on the international health care stage. Potential conflicts of interest. I.B. and K.M.: no conflicts.
This article is the first report on the results of the Indiana Law Alumni Survey, conducted on Indiana University Law School - Bloomington alumni over the last six years. The survey asks for responses from law alumni five and fifteen years out of law school to examine their reflections on their experiences with law school and their experiences in their careers. Extensive data are collected on alumni careers, type of practice, hours of work, income and job satisfaction, as well as personal and family characteristics. The results show that Indiana alumni were active students, and are generally very satisfied when they think back to their law school experiences. Indiana alumni found law school particularly satisfying intellectually. Women were particularly satisfied with their law school experience. Students' participation in extra-curricular activities and employment may be indicative of their future career plans, as it seems that students chose to participate in activities they believed would help for the particular career they wanted to pursue. We also find that, after graduation, Indiana alumni use their talents and skills to undertake successful careers in a variety of professional settings while attempting to balance work with family life. Traditional gender roles affect family life and career as male alumni are more focused on earning income and are more likely to be the primary breadwinner in any marital relationship, while our female alums report significantly greater childcare responsibilities. Women, Blacks, and Hispanics tend to be found in greater proportions as government attorneys, public interest attorneys or acting as corporate counsel, and the women who go into private practice tend to be found disproportionately in the larger law firms. Women and Blacks report lower incomes than men who are predominately found in private practice, while they report similar job satisfaction. Women tend to report higher levels of satisfaction with their families. The personal traits of the examined lawyers and the family choices they make can have profound effects on their careers.
We analyze the design of legal principles and procedures for court decision-making in civil litigation. The objective is the provision of appropriate incentives for potential tort-feasors to exert care, when evidence about care is imperfect and may be distorted by the parties. Efficiency is shown to be consistent with courts adjudicating on the basis of the preponderance of evidence standard of proof together with common law exclusionary rules. Inefficient equilibria may nevertheless also arise under these rules. Directing courts as to the assignment of the burden of proof is then useful as a coordination device. Alternatively, burden of proof guidelines are unnecessary if courts are allowed a more active or inquisitorial role, by contrast with that of passive adjudicator.
Proof of work (POW) is a set of cryptographic mechanisms which increase the cost of initiating a connection. Currently recipients bear as much or more cost per connection as initiators. The design goal of POW is to reverse the economics of connection initiation on the Internet. In the case of spam, the first economic examination of POW argued that POW would not, in fact, work. This result was based on the difference in production cost between legitimate and criminal enterprises. We illustrate that the difference in production costs enabled by zombies does not remove the efficacy of POW when work requirements are weighted. We illustrate that POW will work with a reputation system modeled on the systems currently used by commercial anti-spam companies. We also discuss how the variation on POW changes the nature of corresponding proofs from token currency to a notational currency.
The question of which party should bear the burden of proof on a given factual issue remains one of the most important and problematic in evidence and procedure. This paper approaches the question from a relatively unstudied perspective, viewing litigation as a device for influencing primary activity behavior rather than as a standalone search for truth. Its main finding is as follows: when a given evidentiary contest concerns the primary activity behavior of one of the parties, placing the burden of proof on the other party maximizes the incentive impact of that contest. Though counterintuitive, the finding accords with a striking regularity in existing law. The adversary of the incentive target typically does bear the burden of proof with regard to the target's primary activity behavior. Thus, in tort, the plaintiff bears the burden on the defendant's negligence, but the defendant typically bears the burden on the defense that the plaintiff was contributorily negligent. And in contract the plaintiff bears the burden on the defendant's nonperformance, while the defendant bears the burden of proof on his defense that the plaintiff failed to perform.
This paper examines a two-period tournament where agents may possibly engage in destructive sabotage activities. Under plausible circumstances, sabotage proves to be an effective tool for low-ability agents, especially when they are faced with high-ability opponents. The possibility of sabotage then gives rise to a dynamic concern, similar to the Ratchet effect, because an agent runs a risk of becoming the target of sabotage by signaling his high ability in early stages. In this dynamic setting, we first establish an impossibility result where the mere possibility of sabotage makes it impossible to implement the first-best effort due to this dynamic concern. Given this result, we then offer two distinct incentive schemes, fast track and late selection, to circumvent this problem. The fast-track scheme is likely to prevail when the production process values diversity in inputs (submodular technologies) while the late-selection scheme is to prevail when it values homogeneity (supermodular technologies). The present model offers a mechanism through which both fast track and late selection arise in a unified framework, yielding testable implications for differences in promotion patterns, earnings dynamics and earnings dispersion.
In the television show Deal or No Deal an individual faces a sequence of binary choices between a risky lottery with equiprobable prizes of up to half a million euros and a monetary amount for certain. The decisions of 348 contestants from Italian and British versions of the show are used to test the predictions of ten decision theories: risk neutrality, expected utility theory, the fanning-out hypothesis (weighted utility theory, transitive skew-symmetric bilinear utility theory), (cumulative) prospect theory, regret theory, rank-dependent expected utility theory, Yaari's dual model, prospective reference theory and disappointment aversion theory. Both Italian and British contestants violate assumptions of risk neutrality and loss aversion. There appears to be no evidence of nonlinear probability weighting or disappointment aversion. Observed decisions are generally consistent with the assumption of regret aversion and there is strong evidence for the fanning-out hypothesis. Contestants become more risk averse after foregoing several of the highest ranked prizes, which challenges expected utility framework (or prospective reference theory that gives identical prediction).
U.S. News & World Report (USN&WR) publishes annual rankings of ABA approved law schools. The popularity of these rankings raises the question of whether they influence the behavior of law teachers, lawyers and judges, law school applicants, employers, or law school administrators. This study explores some indicia of USN&WR influence. Using data purchased from USN&WR, we attempt to determine whether USN&WR might have influenced 1) law faculty members who respond to the USN&WR survey of law school quality, 2) lawyers who respond to USN&WR surveys, 3) law school applicants choosing a school, 4) employers who hire law school graduates, and 5) administrators who set tuition. We find significant effects on the first three groups, particularly with respect to lower rank schools. That is, there may be “echo effects” of USN&WR rankings that are folded back into subsequent rankings and tend to stabilize them. We also find that rankings may exert some influence on tuition at law schools outside the top 40.
Martin G. Kocher, Peter Martinsson, Martine Visser
The effects of stake size on cooperation and punishment are investigated using a public goods experiment. We find that an increase in stake size does neither significantly affect cooperation nor, interestingly, the level of punishment.
This Article examines and evaluates the costs and benefits of allowing certain bodies to regulate physician residency programs. Although most scholarship has promoted regulation either by governmental entities, the ACGME, or residents themselves, none of these groups is suited to this task. I argue that the ideal regulatory system should involve a decentralized private sector approach, achieved by ending the ACGME monopoly over graduate medical education accreditation and allowing for multiple graduate medical education accrediting agencies. Switching to a private decentralized system would allow for greater experimentation, which would increase the likelihood of discovering the best way to regulate resident working conditions to enhance patient safety, as well as preserve health professional control over the process.
Cost-based transfer pricing is used by many firms. However, there exist many cost-based methods that may be centralized or decentralized. If centralized, the firm's central office has discretion how accurately to measure the divisions' costs. In order to measure cost reliably, the firm must incur considerable setup costs for an information system. This paper analyzes the tradeoff between the fixed costs of such information gathering and the incentives that arise under several cost-based methods. Our central result is that transfer prices should be based on centralized standard costs if the returns on investments are high and/or if cost uncertainty is low. Decentralization should occur if there is intermediate uncertainty. Finally, transfer pricing should be centralized and based on actual costs if uncertainty is high.
In this paper, we study inventory pooling coalitions within a decentralized distribution system consisting of a manufacturer, a warehouse (or an integration center), and n retailers. At the time their orders are placed, the retailers know their demand distribution but do not know the exact value of the demand. After certain production and transportation lead time elapses, the orders arrive at the warehouse. During this time, the retailers can update their demand forecasts. We first focus on cooperation among the retailers - the retailers coordinate their initial orders and can reallocate their orders in the warehouse after they receive more information about their demand and update their demand forecasts. We study two types of cooperation: forecast sharing and joint forecasting. We show that the cooperative games associated with both situation have non-empty cores. However, by using an example we illustrate how forecast sharing collaboration might lead to bad performance, and asymmetric forecasting capabilities of the retailers might harm the cooperation. On the other hand, joint forecasting always results in higher total expected profit. Finally, we analyze the impact that cooperation and non-cooperation of the retailers has on the manufacturer's profit. We focus on coordination of the entire supply chain through a three- parameter buyback contract. We show that our three-parameter contract can coordinate the system if the retailers have symmetric margins. Moreover, under such a contract the manufacturer prefers retailers' cooperation since he can get a share of improved performance.
This paper develops a regime-splitting process model of decentralized policy implementation in order to integrate two theoretical approaches rooted in the tension between local flexibility and national control. I estimate a model that simultaneously assesses the ability of each approach to explain the outcome it is meant to map onto (case-level discretion for local flexibility, and aggregate responsiveness for national control) as well as each approach's extensibility to the other approach's domain. My data for the study come from the implementation of eight primary statutes by the U.S. Environmental Protection Agency's regional offices. The results are counter-intuitive: the national control approach largely explains case-level discretion, the domain of local flexibility, but retains some power for explaining aggregate responsiveness. The local flexibility perspective contributes to both case-level discretion and aggregate responsiveness. Both models work outside their traditional domains, but neither is a sufficient explanation for decentralized policy implementation.
This working paper is an early draft of two chapters (and the Preface and Bibliography) from a larger work on Contract Law (for the series, Cambridge Introductions to Philosophy and Law). The working paper covers the theory-focused part of the project. The paper analyzes what it means to have a theory of Contract, and what the criteria should be for evaluating such theories. The paper concludes that general or universal theories of Contract Law - at least those that have been presented to date (including economic theories of contract law, and deontological theories focusing on promising or autonomy) - cannot be justified, and we must seek instead to construct a theory that focuses on a particular legal system (or small group of legal systems), and that emphasizes the variety of principles and approaches within Contract Law, rather than seeking to find or impose a unity that does not exist. In the course of the argument, the paper also touches on the role of history in explaining legal doctrine, voluntariness in contract formation, the moral obligation to keep contracts, and the relationship between rights and remedies.
Publicly traded corporations rarely use the nearly absolute freedom afforded them to draft charters that deviate from the default terms of state corporation law. Conventional explanations for this phenomenon are unconvincing. A more plausible reason lies in the lack of any feasible amendment mechanism that will assure efficient adaptation of charter terms as changing circumstances dictate during the long expected lifetime of a public corporation. In effect, by adopting state law default terms, corporate shareholders and managers delegate to a third party - the state - the process of amending charter provisions over time. This theory provides much stronger reason for deferring to the law's default rules than do the other theories that have been offered. It implies that default rules may often be nearly as influential as mandatory rules, and that scholars are not wasting their time debating whether one rule of corporate law is more desirable than another even if, as is typical, the rule chosen will be formulated only as a default. This theory also suggests that it might be beneficial if leading corporate law jurisdictions were to provide greater choice among default terms than they currently do.
Information specialists in enterprises and consumers on the Internet regularly use Distributed Information Retrieval (DIR) systems that query a large number of Information Retrieval (IR) systems, merge the retrieved results and display them to users. There can be considerable heterogeneity in the quality of results returned by different IR servers. Further, since different servers handle collections of different sizes, have different processing and bandwidth capacities, there can be considerable heterogeneity in their response times. The broker in the distributed IR system thus has to decide which servers to query, how long to wait for responses and which retrieved results to display based on the benefits and costs imposed on users. The benefit of querying more servers and waiting longer is the ability to retrieve more documents. The costs may be in the form of access fees charged by IR servers or user's cost associated with waiting for the servers to respond. We formulate the broker's decision problem as a stochastic mixed integer program. We present closed-form results for the optimal query set and wait time in the special case when the relevance scores and response times of the IR servers are independent and identically distributed. When servers are heterogeneous, we present a simulations-based optimization technique and demonstrate how the optimal query set and wait time may be determined. The technique is computationally efficient and can be used to generate decision rules for source selection and query termination that are relatively easy to implement. We use data gathered from two different contexts - a DIR system that queries IR engines of several US federal agencies and a comparison shopping engine that queries multiple stores for price and product information - to validate our technique. Our research demonstrates that user satisfaction can be considerably improved by modeling user utility and incorporating historical information on performance of the IR servers.
Innovative work performed in a distributed fashion does not easily lend to itself either of two classic coordination strategies - anticipatory planning or ongoing rich communication. We study how innovative work that is distributed across space and time is coordinated in global software service organizations. Our findings indicate that neither coordination by plan nor coordination by feedback play a dominant role in the coordination of distributed software services delivery. Instead, we find that the firms we studied coordinate action distributed work by relying on common ground. Common ground leads to coordinated action across locations by two means: the anticipation effect and the interpretation effect. We discuss types of common ground as well as the tools that organizations use to build and maintain it.
Structural reforms focusing on decentralization of power have allowed local governments to undertake a broader range of cultural activities than ever before. However, such activities are mainly financed with subsidies from the national government and donations from companies, because local governments do not have sufficient sources of revenue on their own. Meanwhile, the 21st century is being called the era of art and culture. Although local citizens are impacted mentally as well as economically by the deteriorating employment situation, they are mentally encouraged by artistic and cultural activities. Moreover, there have been a growing number of cases where local communities are revitalized by artistic and cultural activities.This research is designed to identify activities that local citizens can experience in daily life in an effort to see if the local communities have gained control over cultural activities that used to be shackled by subsidies, guidance and advice from the national government (in other words, to see if such local cultural activities meet the needs of this era of decentralization). The data reflect financial aspects of these activities quite accurately. Having said that, each local government takes different measures for the target activities, from improving local cultural standards (e.g., increasing the number of local citizens who appreciate such activities), preserving traditional performing arts, enhancing publicity, increasing the number of people engaged in exchange programs, to community development (e.g., measures against depopulation). It is worth noting that most of these activities are undertaken by municipalities and non-profit organizations.While the 21st century has been dubbed the era of decentralization with the 1999 passage of the Law Concerning Decentralization of Government Authority, local governments receive subsidies exceeding 50% of their budgets from the Japan Foundation for Regional Art Activities under the control of the Agency for Cultural Affairs.JEL classification: R51, R53, Z11
This book addresses a variety of issues \n relating to intergovernmental finance and the provision and \n financing of local services including budgeting and \n financial management, the institutional framework for the \n conduct of intergovernmental relations, appropriate methods \n of service delivery in metropolitan agglomerations and \n remote rural areas, local government enterprises, user \n charges, property taxes, income and value-added taxes, \n natural resource taxes, and local business taxes. \n Throughout, the authors draw on experience both in Canada \n and in other decentralized countries and consider to varying \n extents the special problems facing Russia and other large \n transitional economies.
China's reform to decentralization conduced to the competition in the locals, which helped the marketization of the economy. It also can induce to the government reform, through the locals' need to absorb the economic resources. But this result is restricted by other conditions, especially to the naturally backward areas, it's difficult for them to attract investment, so there are no reform incentives in such locals. Use the public finance transfer to build such areas' infrastructure can mitigate these difficulties and result in the government reform.
The evidence from China (and India) suggests that regional variations in FDI inflow and marginal productivity of capital can readily be explained by some of the usual and un-usual suspects: tax burden, corruption, expected growth rate, infrastructure, access to finance, court and custom efficiency, and quality of life. Given the vast variations in all these dimensions in various regions in China due to the decentralized nature and geography, the large variations in capital-labor ratio and marginal product of capital are perhaps not too difficult to rationalize. The fact that MPK depends on ownership, local leadership, and finance suggest that there is perhaps allocation inefficiency. What are fundamental causes, and their relative importance, and how important is the magnitude of inefficiency, however, remains to be investigated.