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In this paper, we take up the question why a group of sovereign countries is willing to form a federation even if residents of the high-income region suspect potential immigrants to be net beneficiaries of the tax and transfer system. We argue that income uncertainty alone cannot satisfactorily explain the formation of federations, since in many existing and developing federations income differences are both large and persistent. In the model presented here remaining separated involves costs for the high-income region, which can be regarded as a proxy for the efficiency loss caused if mobile factors cannot reallocate. A fiscal equalization scheme that shares the resources saved by limiting costly migration between the regions can make both regions better off.

This paper examines the consequences of creating a fully competitive market in a sector previously dominated by a cost-minimising public firm. Workers in the economy are heterogeneous in their motivation to work in the sector. In line with empirical findings, our model implies that firms in the competitive market provide stronger monetary incentives to workers, reach higher productivity, and employ less workers than the public firm. Allocative efficiency therefore increases. Nevertheless, prices of the sector's output rise as competition between private firms for the best motivated workers leads to higher wage cost than under the public monopsony. Political support for liberalisation may therefore be limited.

Denmark has drawn much attention for its active labor market policies, but is almost unique in offering a voluntary public unemployment insurance program requiring a significant premium payment. A safety net program – a less generous, means-tested social assistance plan – completes the system. The voluntary system emerged as one of many European "Ghent systems," essentially government subsidized trade union plans, but has since lost many key features of such plans. We assess system performance using a 10% sample of the Danish population drawn from administrative data. Coverage rates for the voluntary programs are surprisingly high, approximately 80 percent of the workforce, but the program has predictable selection effects, including adverse selection across risk classes and a substantial charity hazard (low coverage among those with generous treatment under the safety net program). The latter appears to explain the difficulty of shifting to a compulsory system; redistribution effects would be concentrated among the previously uninsured in the lowest decile of the income distribution, a problem in the Danish welfare state.

The achievements of social-welfare arrangements in Western Europe are well known: considerable income security, relatively little poverty and, in some countries, ample supply of social services. But there are also well-known weaknesses and hence considerable scope for improvement. Three types of weaknesses are considered in this paper: social-welfare arrangements are often not financially robust to shocks; individuals make undesirable behavioural adjustments in response to welfare-state arrangements and their financing; and social-welfare arrangements are often poorly adapted to recent changes in socio-economic conditions and preferences of individuals. I discuss these weaknesses, and alternative methods to mitigate them, in the context of various types of welfare-state arrangements that the individual may encounter over the life cycle.

We show that U.S. withdrawal from the Kyoto Protocol is straightforward under political economy considerations. The reason is that U.S. compliance costs exceed low willingness to pay for dealing with global warming in the U.S. The withdrawal had a crucial impact on the concretion of the Protocol prior to its likely ratification at the end of 2002. Remaining non-EU Parties to the Kyoto Protocol gained veto bargaining power and, thus, were successful in asserting far reaching concessions from the EU on sink credits and tradability of emission rights. Taking these concessions into account, the Kyoto Protocol was essentially reduced to a symbolic treaty that codifies more or less business-as-usual emissions and makes compliance a rather cheap deal.

The US decision not to ratify the Kyoto Protocol and the recent outcomes of the Bonn and Marrakech Conferences of the Parties drastically reduces the effectiveness of the Kyoto Protocol in controlling GHG emissions. The reason is not only the reduced emission abatement in the US, but also the spillover effects on technology and countries' relative bargaining power induced by the US decision. Therefore, it is crucial to analyse whether an incentive strategy exists that could induce the US to revise their decision and to comply with the Kyoto commitments. One solution, occasionally proposed in the literature and in actual policymaking, is to link negotiations on climate change control with decisions concerning international R&D cooperation. This paper explores this idea by analysing on the one hand the incentives for EU, Japan and Russia to adopt this strategy, and on the other hand the incentives for the US to join a coalition which cooperates both on climate change control and on technological innovation. The extended regime in which cooperation takes place on both dimensions (GHG emissions and R&D) will be examined from the view point of countries' profitability and free-riding incentives. Finally, after having assessed the effectiveness and credibility of the issue linkage strategy, we explore the economic and environmental benefits of a new, recently proposed regime, which aims at achieving GHG emission control by enhancing cooperation on technological innovation and diffusion (without targets on emissions).

It has become increasingly common to allocate highway franchises to the bidder that offers to charge the lowest toll. Often, building a highway increases the value of land held by a small group of developers, an effect that is more pronounced with lower tolls. We study the welfare implications of highway franchises that benefit large developers, focusing on the incentives developers have to internalize the effect of the toll they bid on the value of their land. We study how participation by developers in the auction affects equilibrium tolls and welfare. We find that large developers bid more aggressively than construction companies that own no land. As long as land ownership is sufficiently concentrated, allowing developers in the auction leads to lower tolls and higher welfare. Moreover, collusion among developers is socially desirable. We also analyze the case when the franchise holder can charge lower tolls to those buying her land ('toll discrimination'). Relative to uniform tolls, discrimination decreases welfare when land is highly concentrated, but increases welfare otherwise. Finally, we consider the welfare implications of subsidies and bonuses for proposing new highway projects.

We introduce democratic mechanisms where individual utilities are not observable by other people at the legislative stage. We show that the combination of three rules can yield e±cient provision of public projects: first, flexible and double majority rules where the size of the majority depends on the proposal and taxed and non-taxed individuals need to support the proposal; second, flexible agenda costs where the agenda-setter has to pay a certain amount of money if his proposal does not generate enough supporting votes; third, a ban on subsidies. We also illustrate that higher dimensional uncertainty about project parameters can make it easier to achieve first-best allocations and that universal equal treatment with regard to taxation is undesirable.

Health care systems in developed countries worldwide are not only faced with costs of new medical technologies but they are also faced with growing propor-tions of elderly people who by far induce largest demands of health services. Spending on health care is now up to 10% or more of gross national product in some countries. This causes concern whether the most part of expenditure is publicly financed under social insurance or mainly financed by private non compulsory insurance. The same questions concern the provision of health services either more private or more public. Countries have drifted into different ways of providing and financing health services. Long run consequences are often not foreseen. Therefore it becomes important what is to be learned from the experience of countries with similar or different health care systems. And is the experience valuable and transferable regarding historical developments of health care systems and cultural differences between the nations? In nahezu allen industrialisierten Ländern besteht der Anspruch, der gesamten Be-völkerung oder zumindest den Mitgliedern der Sozialversicherung alle medizinischen Leistungen zu-gänglich zu machen, die am Markt verfügbar sind. Dabei müssen die Länder nicht nur Kosten für medizinische Leistungen und neue Entwicklungen in der Medizin finanzieren, sondern auch die Ausgabensteigerungen im Gesundheitswesen auf Grund einer absolut und realtiv wachsenden Zahl älterer Menschen bewältigen. Die Ausgaben für Gesundheitsleistungen liegen in den meisten der entwickelten Länder an der Schwelle von 10% des Sozialprodukts. In vielen Ländern stellt sich deshalb die Frage, ob in Zukunft der Großteil der Gesundheitsausgaben wie in einem Sozialversicherungssystem weitgehend öffentlich finanziert werden soll oder von den Bürgern in höherem Maße privat zu finanzieren ist auch mittels privaten Krankenversicherungsschutzes. Ebenso ist festzulegen, inwieweit die Leistungserbringung privat oder öffentlich erfolgen soll. Die Finazierung und Bereitstellung von Gesundheitsleistungen hat sich in den Gesundheitssystemen unterschiedlich entwickelt. Langfrsitige Auswirkungen von Veränderungen in der Finanzierung und Bereitstellung sind oftmals schwer abzusehen und häufig unzureichend untersucht. Deshalb gewinnt es an Bedeutung, Entwicklungen im Gesundheitswesen in anderen Ländern daraufhin zu prüfen, welche Elemente der Versorgung für das eigene System nutzbar ist und inwieweit Erfahrungen sowie Teile und Teilbereiche des Systems vor dem Hintergrund historischer Entwicklungen und kultureller Unterschiede übertragen werden können.

It has turned out to be difficult to adjust welfare-state arrangements to new circumstances. This paper emphasizes developments in the labor market and changes in the structure and preferences of the family. The former include changes in demography, productivity growth and international linkages as well as increased part-time work, new types of labor-market contracts and tendencies toward an “insider-outsider divide” in the labor market. Changes in family structure include a rise in female labor-force participation, a decline in family stability, more variation in individual life cycles and increased individualization of values and life styles. A number of alternative welfare-state reforms are also considered.

Government firms and authorities often sell services in the free market via affiliated consulting firms (CFs). In this study, I analyze whether these agents have an unfair competitive edge compared to private CFs. The theoretical analysis shows that private and state-owned CFs operate under different conditions. A private CF must choose between having permanent employees and pay full-time wages with the risk of over- and under-capacity or hiring professionals temporarily in the free market, which gives flexibility but may cause problems in hiring qualified professionals. In contrast, state-owned CFs can hire professionals from their parents and have the exclusive right to do so. With experiences from Sweden, I show that this exclusive dealing contract is a schoolbook example on unfair competition and gives several negative welfare effects and consequences. First, private CFs’ profits are lowered. In some cases, private CFs are deterred from entering the market. Second, competition is limited, meaning that the buyers of consulting services are worse off. Third, a necessary reorganization of the Swedish consulting sector is prevented. Fourth, the unfair competition is the main reason why the re-flow to Sweden from multilateral development agencies has been so low during the recent 20 years. This last consequence is especially analyzed.

This paper elaborates on the recent race to sequence the human genome. Starting from the debate on public vs. private research arising from the genome case, the paper shows that in some fundamental research areas, where knowledge externalities play an important role, market and non-market allocation mechanisms do coexist and should coexist in order to ensure socially desirable achievements. A game-theoretic model makes it possible to demonstrate the above results and to characterise some features of an optimal research policy.

The management of biosecurity risks (risks to the production sector, to indigenous biodiversity, and to public health) involves the exercise of extensive regulatory powers both at the border and within New Zealand. This paper reviews the Biosecurity Act 1993, paying particular attention to its requirements for risk analysis and decision-making. These are generally of a high standard. Requirements at the border are significantly influenced by New Zealand's trading obligations and opportunities. Requirements for domestic pest management strategies are elaborate but can be sidestepped. Cost recovery practices for biosecurity differ widely and have been controversial.

We assess the impact of Rhode Island's Family Independence Program (FIP) on the employment and earnings of current and former cash assistance recipients. We use administrative data from many sources, including data from state cash assistance records and from employer reports of employment and earnings from the Unemployment Insurance program. Our data are for all-female-headed households receiving Rhode Island cash assistance during the period May 1996 to April 2000. In all we have observations on 29,253 families for an average of 16.6 quarters. We estimate our models using a number of techniques and find that the impacts of major variables are robust across the techniques used. Our results indicate that the major impact of FIP was to increase the likelihood that current and former cash assistance recipients would work. Our best estimate is that the impact of the many changes associated with FIP was to increase the likelihood of work by about 10%. Estimates also indicate that FIP increased the quarterly earnings of current and former cash assistance recipients. However, the estimated increase in quarterly earnings due to FIP was relatively modest (i.e., about $200 per quarter). During the study period, earnings increased substantially (i.e., from a little over $1,000 per quarter to over $2,500 per quarter), but our results indicate that most of this increase was due to increases in the Rhode Island minimum wage, not to FIP.

In this paper we investigate the demand for local public school expenditures in Sweden using survey data, a method previously never applied to Swedish data. We compare our results to those of earlier US studies, where the same method is used in a different institutional setup. Estimating a linear demand specifica-tion, we find that demand is inelastic with respect to income and taxprice, much in line with previous Swedish findings in a median voter framework. Es-timation of a log-linear demand specification indicates that the elasticities of demand for schooling are higher in Sweden than in the US. Testing the hy-pothesis that municipal employees tend to have a higher demand for public spending than others, we conclude that income, as well as taxprice and grants, enters the demand function differently for the two groups of employees.

The recent process of political and economic transformation in eastern European countries has not only contributed to the decentralisation of political structure but also significantly enhanced the fiscal autonomy of municipalities belonging to these countries. Although the degree of self-governing ability of municipalities seems to vary from one country to another, many similar types of public activities have recently been assigned to local governments, and some taxes were also declared to be so-called local taxes. To be sure, this type of fiscal decentralisation has caused some additional problems, particularly for safeguarding the quality of publicly provided goods and services and for coordinating intergovernmental fiscal transfers between the central and local governments in an efficient way. For instance, some criticise that a large number of small-sized municipalities in the transition economies have suffered from financial bottleneck and have not been able to receive financial support from the central government that was necessary for their economic development. However, such a fiscal devolution trend appears to continue, in parallel to the ongoing democratisation and decentralisation. This study primarily deals with crucial issues surrounding the impact of national fiscal policy and the regulatory framework on local governments' expenditure behaviour and their ability to mobilise necessary revenues (i.e. tax income, grants and municipal borrowings) under the particular consideration of the institutional and administrative cooperation with the central government and of the (still existing) lesswell developed financial market in Poland, the Slovak Republic, the Czech Republic and Hungary.

We assess the role of child care in the welfare to work transition using an unusually large and comprehensive data base. Our data are for Massachusetts, a state that began welfare reform in 1995 under a federal waiver, for the period July 1996 through August 1997. We find that both the nature of the child care market and the availability and policies of subsidized care and early education affect the probability that current and former welfare recipients will work. Regarding the child care market, we find that the availability of care is most consistently related to employment. However, the price and quality of care also matter. We also find that increased funding for child care subsidies, and the availability of full day kindergarten and Head Start significantly increase the probability that current and former welfare recipients work. Higher state payments to providers are associated with increased probabilities of work. Finally, recipients are more likely to work when they are subject to a work requirement. The effects of imposing time limits on cash assistance are less clear.

"Wettbewerb" und "Bildungspolitik" stehen in zweifacher Hinsicht im Zusammenhang: Erstens erfordert der internationale Wettbewerb den Erhalt und Ausbau des deutschen Humankapitalbestands. Damit dabei die Ressourcen effizient eingesetzt werden, ist es zweitens notwendig, mehr Wettbewerbselemente in das Bildungssystem einzuführen. Im Schulwesen spricht dies für eine Stärkung der Autonomie der Schulen und der Rolle der Eltern bzw. der erwachsenen Schüler als Nachfrager des Bildungsangebots bei staatlich zu gewährleistender Qualitätssicherung. Im Universitätsbereich ist das Missverhältnis von staatlichem Einfluss und seiner ökonomischen Legitimation besonders eklatant. Der zentrale Reformansatz ist hier die Einführung von Studiengebühren bei einer Stärkung von Handlungsspielraum und ?verantwortung der Universitäten.

This paper considers the problem of how a government, having decided to reduce greenhouse gas emissions, identifies the policy or mix of policies that achieves this reduction at the lowest possible net economic cost. This involves accounting for the fact that each potential policy for reducing GHGs has a different financial cost, and implies a different set of direct and indirect costs and benefits, each of which must be weighted according to the government's particular priorities. This paper reports on work that extends the existing analysis of the costs and benefits implied by different mitigation policies to include employment and income distribution effects, reduced air pollution and the achievement of environmental and economic sustainability. We outline an approach for compiling these elements into selection criteria that will help policymakers identify the lowest-cost mitigation policies. We present an application of the methodology to a prospective energy-saving project in Hungary. We argue that this methodology, although by no means precise at this stage, provides a useful decision-making tool.

A method is presented for computing long-term greenhouse gas emission pathways for both industrial ("Annex B") countries and developing ("non-Annex B") countries. This method combines two main factors: (i) climate protection goals, in the form of targets for stabilising CO2 in the atmosphere, and (ii) the allocation of global emissions to industrial and developing countries based on a so-called "burden sharing" scheme. In this paper two CO2 stabilisation targets are investigated - stabilisation at 450 ppm in 2100 and 550 ppm in 2150. The burden sharing scheme is based on the following rules: A non-Annex B country increases its emissions according to a "baseline" no-policy scenario until its national income reaches a specified "graduation" income level. After reaching this level it freezes its per capita emissions until they are equal to the average per capita emissions in Annex B countries. After this point, the per capita emissions of the non-Annex B country are the same as the average for Annex B countries. For a variety of assumptions about the graduation income level, it was found that the two stabilisation targets can be achieved even if total emissions from non-Annex B countries increase until around 2030. However, after this point, emissions from these countries must stabilise or be sharply reduced.

Questions of burden sharing receive increasing attention in the climate change regime. This paper introduces the WESA-mechanism (WESA = Walrasian Equilibrium with the Stand Alone upper bound) for the fair division of common property resources and monetary compensations. Furthermore, the criterion of envy-freeness is adapted to the transferable utility context. The WESA-mechanism satisfies individual rationality, envy-freeness and the stand alone test, which follows as a minimum requirement from the resource and population monotonicity criteria, and thus compares favourably to the often advocated Walrasian mechanism. Finally, the WESA-mechanism will be applied to the fair division of climate protection burdens and illustrated quantitatively with a computable general equilibrium model. One of the central results is that developing countries should participate in emission reduction efforts in order to increase their global efficiency, but should be fully compensated for their incremental abatement costs.

Most currently employed Integrated Assessment Models are of a dynastic nature, commonly assuming a fixed relation between pure time preference, economic growth and interest rate. This rigid relation has led to much debate on which level of discounting to adopt. Especially the quantitative results of Integrated Assessment Models have been subject to controversy because of their strong sensitivity on future discounting. Many economic analysts advocate employing a descriptive time preference, based on historic data, which usually represents an approximate efficient use of environmental resources. Others encourage assuming a prescriptive time discounting, allowing them - by taking low discount values - to model a sustainable use of environmental services. This paper argues that, although a fixed time preference relation might be convenient for economic analysis, such a supposition can be misleading. By avoiding a rigid discounting relation, the descriptive-prescriptive controversy can be avoided. It is concluded that dynastic Integrated Assessment Models are in many respects inappropriate for providing policy makers with quantitative figures about the costs of carbon dioxide emissions, and their desirable reduction levels. In contrast, Overlapping Generations models, allowing the use of a flexible discounting relation, are suitable for designing a broad class of policy instruments. With the Integrated Assessment Model ALICE 2.0, it is shown how various assumptions on demographic change and public institutions can affect the interest rate, thereby influencing the desired optimal greenhouse gas emission reductions. It is recommended that economic modelling intensify attempting to establish both efficient and sustainable resource use. The discount rate should be treated as an endogenous variable, rather than an exogenous parameter characterising a central planner.

In this paper the importance and the effects of technological opportunities, stemming from academic research, on the innovation activities of firms in the German automobile supply industry are investigated. We observe that the contribution of academic research to firms' innovation activities is less important than the relevance of industrial sources but yet, the most likely partners for formal R&D co-operations are universities. Using measures of suppliers' innovation input and output, we can outline differences in the effects of academic research on suppliers' innovation behavior. Although the proximity to academic research stimulates suppliers' activities in own R&D, the university knowledge substitutes suppliers' investment in R&D and other innovation activities. University co-operations seem to have a positive impact on the improvement of existing rather than on the development of new products or processes. But we can show that the influence of academic research on suppliers' inhouse innovation activities depend on their absorptive capacities.

Mit Argumenten aus der "Theorie des Marktversagens" und der "Neuen Politischen Ökonomie" kann gezeigt werden, daß Universitäten und Forschungsinstitute spezielle "Öffentliche Güter" produzieren, die eine Grundfinanzierung durch den Staat unter Effizienzgesichtspunkten rechtfertigen. Allerdings wäre die Produktion solcher wirtschafts- und sozialwissenschaftlicher Forschungsergebnisse durch einen einzigen Typ Forschungseinrichtung suboptimaL Da unterschiedliche Anforderungen an diese Forschungsergebnisse bestehen, ist es möglich, die Effizienz der Forschung durch eine Arbeitsteilung zwischen Universitäten, amtlicher Statistik sowie wirtschafts- und sozialwissenschaftlichen Forschungsinstituten zu steigern. Zugleich steigert Wettbewerb innerhalb der jeweiligen institutionellen Forschungssegmente (einschließlich der Produktion statistischer Daten) Effizienz und Effektivität der Forschung (und Lehre)- mit der Konsequenz, daß ein institutionalisierter "Wettbewerber" auch ausscheiden können muß, also beispielsweise eine Universität oder ein Forschungsinstitut geschlossen wird. Zu diesem Zweck sind Evaluierungen durch den grundfinanzierenden Staat durchzuführen, weil es sich bei den Forschungsaktivitäten um solche in einem nichtmarktlichen Wettbewerb handelt. Die zugrundeliegenden Evaluierungskriterien müssen dem Tatbestand Rechnung tragen, daß grundfinanzierte Forschung sowohl "selbstbestimmt" als auch von den Inhalten her "außengesteuert" ausgerichtet sein kann; aber selbst für vom Markt gesteuerte "reine Auftragsforschung" ist eine Evaluation deren akademischer Qualität sinnvoll. In Germany there are several research institutes for empirical economic and social research which are in major part financed by the government. From an economic point of view, it is not obvious to finance such institutes by the state. This paper examines the economic rationale for such public funding by means of the "theory of market failure" and "Public Choice Theory". One major result is that those institutes produce a public good (basic information which is important for public discussion in a democracy), making public funding necessary. But public funding does not imply the production of this information by the state itself. Competition between several institutes is meaningful. The second major result is that contrary to the organization of statistical bureaus in almost all states, such competition is also useful for the production of statistical data. A third result shows that due to the asymmetric nature of information on the quality of scientific outcomes, an academic evaluation of production of statistical data and research is necessary, not only for pure academic work, but also for applied work in a market setting.

Die Entwicklung und Nutzung neuer Technologien basiert zunehmend darauf, daß akademische Forschung und industrielle Innovationsaktivitäten miteinander verknüpft werden müssen. Die Zielsetzung des Beitrages besteht deshalb darin, für den Bereich der deutschen Automobilzulieferindustrie die Bedeutung von Hochschulkooperationen für betriebliche Innovationsaktivitäten empirisch zu untersuchen. Erstmals in dieser Form für die Bundesrepublik Deutschland werden Stellenwert, Motive und Wirkungen vertraglich abgesicherter F&E Kooperationen zwischen Automobilzulieferern und Hochschulen einer differenzierten Analyse unterzogen. Es zeigt sich, daß in der deutschen Automobilzulieferindustrie eine hohe Kooperationsneigung besteht, die von den absorptiven Fähigkeiten und von der Betriebsgröße der Zulieferer abhängt. Vertraglich abgesicherte F&E-Kooperationen mit Hochschulen erweisen sich für Automobilzulieferer deshalb als vorteilhaft, weil dadurch technologische Innovationskapazitäten erweitert und betriebsintern vorhandene automobilspezifische Innovationspotentiale effektiver genutzt werden können. Im Rahmen von Hochschulkooperationen lassen sich Entwicklungskosten einsparen, weniger jedoch Verbesserungen der Produktqualität erzielen. – Hochschulkooperationen ; betriebliche Innovationsaktivitäten ; absorptive Fähigkeiten ; Automobil(zuliefer-)industrie The development and adaption of new technologies are based on the interrelation of academic research and applied industrial innovation activities. Therefore, the aim of this paper is to investigate empirically the importance of R&D cooperations with universities for the innovation activities of suppliers in the German automobile industry. Relevance, motives, and benefits of contractual R&D cooperation between automobile suppliers and universities will be analyzed for the first time in great variety. It will be shown that in the German automobile supply industry the high preference of firms to cooperate with universities depends on the size of the firm as well as on their absorptive capacities. Formal R&D arrangements with universities are prefered because automobile suppliers can enhance their technological innovation capacities to develop new or improved products and use their automobile-specific innovation potentials, developed inhouse, more efficiently. Further, by establishing formal cooperative R&D arrangements with universities suppliers in Germany rather save R&D costs than realize quality improvements of products.

The paper shows that interjurisdictional competition for mobile factors of production forces the government to raise the efficiency of the public sector and, thus, helps to tame Leviathan governments. However, this result is derived under some restrictive assumptions concerning the kind of tax policy used by the government. In the case of benefit taxes, e.g. user charges, a Leviathan may be tamed by interjurisdictional competition whereas this is not necessarily true in the case of lum-sum taxes.

It has been argued in the literature that, interjurisdictional competition forces the public sector to increase its efficiency and thus helps to tame Leviathan governments. The paper addresses this hypothesis by means of a simple taxcompetition model with a Leviathan state. It is seen that the effects of increased factor mobility on the efficiency of the public sector are ambiguous. A calibration of the model shows that a reduction in public-sector efficiency is possible for parameter constellations which are not unrealistic.

This paper discusses the role of transfers in a non-cooperative environment. If reselling in-kind-transfers involves some retrading costs, in-kind transfers are supposed to realise at least some of the mutual bargaining gains which would be left unexploited by mere use of monetary payments. These retrading costs bias the recipient's consumption plans in favour of the donor. However, the paper shows that non-enforceability alone does not support the exclusive application of inkind transfers in general because income effects can leave some scope for monetary transfers. The results of the model are discussed for some applications.

We conduct a CV and a CE experiment using a generic rather than a situation-specific study design in order to obtain a generic marginal value function for different types of natural areas with different characteristics in the Netherlands. We develop a modelling approach in which we use CV and CE choice data in one model. The value function obtained shows that people attach value to the presence of natural areas, and that these values vary due to differences in the magnitude of areas, in distance to areas, and differences in accessibility and fragmentation of natural areas. We discuss how the value function can be used to incorporate potential substitution between natural areas. We also show that for approximately one-fifth of our sample there is no added value having any kind of natural area nearby and that people living in small municipalities tend to be indifferent between accessible and inaccessible areas. Our approach produces a generic marginal value function, which may be used to inform cost–benefit analyses and land use planning decisions that wish to incorporate positive and negative welfare externalities related to changes in the provision of natural areas. However, we also show that applying this value function to the regional or local scale may produce biased value estimates.

Governments often see it as their responsibility to support cultural life and at times spend a significant amount of resources in the pursuit of this goal. The present paper analyses whether and how municipalities influence each other in this decision to spend resources on the arts (using data on local government cultural spending in 304 Flemish municipalities in 2002). Following ‘central place theory’, the focal point of the analysis is the idea that – especially for cultural expenditures – large municipalities (and, specifically, ‘central places’) may affect their neighbours’ behaviour differently than small municipalities. The empirical analysis is supportive of this idea. Indeed, we show that Flemish municipalities’ cultural spending is generally positively affected by that in neighbouring municipalities. This pattern is, however, significantly more complex for municipalities neighbouring the 13 largest Flemish cities. Regierungen sehen sich gemeinhin in der Verantwortung, für die Unterstützung des kulturellen Lebens zu sorgen und wenden hierfür erhebliche Ressourcen auf. Im vorliegenden Artikel wird analysiert, ob und wie sich Gemeinden gegenseitig bei der Entscheidung für Ressourcenaufwendungen im Bereich Kunst und Kultur beeinflussen. Diese Analyse beruht auf Daten über Ausgaben im Kulturbereich von 304 flämischen Gemeinden im Jahr 2002. Der „central place“-Theorie folgend liegt der Schwerpunkt der Analyse auf der Idee, dass gerade im kulturellen Bereich der Einfluss großer Gemeinden (und insbesondere von „zentralen Orten“) auf die Entscheidung der Nachbargemeinden ein anderer ist, als der Einfluss kleinerer Gemeinden. Die empirische Analyse stützt diesen Ansatz. In der Tat lässt sich zeigen, dass die Ausgaben im Kulturbereich flämischer Gemeinden positiv durch die Ausgaben ihrer Nachbargemeinden beeinflusst werden. Für die Nachbargemeinden der 13 größten flämischen Städte ist dieses Muster jedoch erheblich komplexer.

Background: China has five layers of government including the central government. Recently, some prefectural governments meet fiscal distress. Methods: We investigate the effects of urban and rural populations and area sizes on the expenditures of the prefecture-level local government by estimating quintile regression. Results: At around 220,000 people, per capita local government expenditure for urban populations is minimized in our simulation. The expenditure for rural populations is proportional to the population size. The expenditure in accordance with the areas is also proportional to the area size. Conclusions: The cost structure is the reason why China's recent rapid urbanization increases prefectural government's fiscal distress.

Over the period 2005-2009 the Dutch government increased childcare subsidies substantially, reducing the average effective parental fee by 50%, and extended subsidies to so-called guestparent care. We estimate the labour supply effect of this reform with a difference-in-differences strategy, using parents with older children as a control group. We find that the reform had a moderately sized impact on labour supply. Furthermore, the effects are an upper bound since there was also an increase in an earned income tax credit for the same treatment group over the same period. The joint reform increased the maternal employment rate by 2.3%-points (3.0%). Average hours worked by mothers increased by 1.1 hours per week (6.2%). Decomposing the hours effect we find that most of the increase in hours is due to the intensive margin response. A number of robustness checks confirm our results.