Wallace E. Oates

Bio: Wallace E. Oates is an academic researcher from University of Maryland, College Park. The author has contributed to research in topics: Fiscal federalism & Public finance. The author has an hindex of 53, co-authored 137 publications receiving 21632 citations. Previous affiliations of Wallace E. Oates include Resources For The Future & Princeton University.

An Essay on Fiscal Federalism

Abstract: vogue. Both in the industrialized and in the developing world, nations are turning to devolution to improve the per- formance of their public sectors. In the United States, the central government has turned back significant portions of federal authority to the states for a wide range of major programs, including wel- fare, Medicaid, legal services, housing, and job training. The hope is that state and local governments, being closer to the people, will be more responsive to the particular preferences of their con- stituencies and will be able to find new and better ways to provide these ser- vices. In the United Kingdom, both Scot- land and Wales have opted under the Blair government for their own regional parliaments. And in Italy the movement toward decentralization has gone so far as to encompass a serious proposal for the separation of the nation into two in- dependent countries. In the developing world, we likewise see widespread inter- est in fiscal decentralization with the ob- jective of breaking the grip of central planning that, in the view of many, has failed to bring these nations onto a path of self-sustaining growth. But the proper goal of restructuring the public sector cannot simply be de- centralization. The public sector in nearly all countries consists of several different levels. The basic issue is one of aligning responsibilities and fiscal in- struments with the proper levels of gov- ernment. As Alexis de Toqueville ob- served more than a centuty ago, "The federal system was created with the in- tention of combining the different ad- vantages which result from the magni- tude and the littleness of nations" (1980, v. I, p. 163). But to realize these "dif- ferent advantages," we need to under- stand which functions and instruments are best centralized and which are best placed in the sphere of decentralized levels of government. This is the sub- ject matter of fiscal federalism. As a subfield of public finance, fiscal feder- alism addresses the vertical structure of the public sector. It explores, both in normative and positive terms, the roles of the different levels of government and the ways in which they relate to one another through such instruments as intergovernmental grants.2

The Theory of Environmental Policy

Abstract: In this book, Professors Baumol and Oates provide a rigorous and comprehensive analysis of the economic theory of environmental policy. They present a formal, theoretical treatment of those factors influencing the quality of life. By covering both the theory of externalities and its application to environmental policy, the authors have retained the basic structure and organization of the first edition, which has become a standard reference in the field. In this edition, however, they have updated their analysis to incorporate recent research in environmental economics.

Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?

Abstract: MS ff ichael Porter and Claas van der Linde have written a paper that is interesting and, to us at least, somewhat astonishing. It is a defense of environmental regulation-indeed, an invitation to more stringent regulation-that makes essentially no reference to the social benefits of such regulation. This approach contrasts starkly with the methods that economists and other policy analysts have traditionally used when assessing environmental or other regulatory programs. The traditional approach consists of comparing the beneficial effects of regulation with the costs that must be borne to secure these benefits. For environmental regulation, the social benefits include the reductions in morbidity or premature mortality that can accompany cleaner air, the enhanced recreational opportunities that can result from water-quality improvements, the increased land values that might attend the cleanup of a hazardous waste site, the enhanced vitality of aquatic ecosystems that might follow reductions in agricultural pesticide use or any of the other potentially significant benefits associated with tighter standards. From this benefit-cost approach emerges the standard tradeoff discussed in virtually every economics textbook. Porter and van der Linde deny the validity of this approach to the analysis of environmental regulation, claiming it to be an artifact of what they see as a "static mindset." In their view, economists have failed to appreciate the capacity of

The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis

Abstract: The purpose of this paper is to present some empirical findings on a problem for which we presently possess only the scantest of evidence: the effects of local public budgets on property values in the community. There do exist several studies of the incidence of property taxes, the mainstay of local revenue systems in the United States, but in nearly all cases these studies are based on assumptions concerning the degree to which the tax on various components of property is capitalized. We have, however, little hard empirical evidence indicating whether property taxes are in fact capitalized and, if so, to what extent.1 This deficiency might not seem very serious if we had a single, compelling theory of the shifting and incidence of property taxes, a theory which suggested a definite solution to the problem. The truth, however, is that the theory of the shifting of property taxes points to a wide range of possibilities: under some circumstances the whole of the tax may be reflected in a reduced rental income (and hence lower property values) for landlords, while in other situations the tax may result primarily in increased rents to tenants, with little impact on the market value of property. Some years ago in this journal, Tiebout (1956) developed a formal model involving consumer location in accord with preferences for local public goods and services. He suggested that at least at a theoretical level we can envision a system in which we get something resembling a market solution to the production and consumption of local public goods. Very simply, Tiebout's world is one in which the consumer "shops" among different

Econometric Analysis of Cross Section and Panel Data

Abstract: The second edition of this acclaimed graduate text provides a unified treatment of two methods used in contemporary econometric research, cross section and data panel methods. By focusing on assumptions that can be given behavioral content, the book maintains an appropriate level of rigor while emphasizing intuitive thinking. The analysis covers both linear and nonlinear models, including models with dynamics and/or individual heterogeneity. In addition to general estimation frameworks (particular methods of moments and maximum likelihood), specific linear and nonlinear methods are covered in detail, including probit and logit models and their multivariate, Tobit models, models for count data, censored and missing data schemes, causal (or treatment) effects, and duration analysis. Econometric Analysis of Cross Section and Panel Data was the first graduate econometrics text to focus on microeconomic data structures, allowing assumptions to be separated into population and sampling assumptions. This second edition has been substantially updated and revised. Improvements include a broader class of models for missing data problems; more detailed treatment of cluster problems, an important topic for empirical researchers; expanded discussion of "generalized instrumental variables" (GIV) estimation; new coverage (based on the author's own recent research) of inverse probability weighting; a more complete framework for estimating treatment effects with panel data, and a firmly established link between econometric approaches to nonlinear panel data and the "generalized estimating equation" literature popular in statistics and other fields. New attention is given to explaining when particular econometric methods can be applied; the goal is not only to tell readers what does work, but why certain "obvious" procedures do not. The numerous included exercises, both theoretical and computer-based, allow the reader to extend methods covered in the text and discover new insights.

The Economics of Schooling: Production and Efficiency in Public Schools.

Abstract: N RECENT YEARS, public and professional interest in schools has been heightened by a spate of reports, many of them critical of current school policy.' These policy documents have added to persistent and long-standing concerns about the cost, effectiveness, and fairness of the current school structure, and have made schooling once again a serious public issue. As in the past, however, any renewed interest in education is likely to be short-lived, doomed to dissipate as frustration over the inability of policy to improve school practice sets in. This frustration about school policy relates directly to knowledge about the educational production process and in turn to underlying research on schools. Although the educational process has been extensively researched, clear policy prescriptions flowing from this research have been difficult to derive.2 There exists, however, a consistency to the research findings that does have an immediate application to school policy: Schools differ dramatically in "quality,"

An Essay on Fiscal Federalism

Abstract: vogue. Both in the industrialized and in the developing world, nations are turning to devolution to improve the per- formance of their public sectors. In the United States, the central government has turned back significant portions of federal authority to the states for a wide range of major programs, including wel- fare, Medicaid, legal services, housing, and job training. The hope is that state and local governments, being closer to the people, will be more responsive to the particular preferences of their con- stituencies and will be able to find new and better ways to provide these ser- vices. In the United Kingdom, both Scot- land and Wales have opted under the Blair government for their own regional parliaments. And in Italy the movement toward decentralization has gone so far as to encompass a serious proposal for the separation of the nation into two in- dependent countries. In the developing world, we likewise see widespread inter- est in fiscal decentralization with the ob- jective of breaking the grip of central planning that, in the view of many, has failed to bring these nations onto a path of self-sustaining growth. But the proper goal of restructuring the public sector cannot simply be de- centralization. The public sector in nearly all countries consists of several different levels. The basic issue is one of aligning responsibilities and fiscal in- struments with the proper levels of gov- ernment. As Alexis de Toqueville ob- served more than a centuty ago, "The federal system was created with the in- tention of combining the different ad- vantages which result from the magni- tude and the littleness of nations" (1980, v. I, p. 163). But to realize these "dif- ferent advantages," we need to under- stand which functions and instruments are best centralized and which are best placed in the sphere of decentralized levels of government. This is the sub- ject matter of fiscal federalism. As a subfield of public finance, fiscal feder- alism addresses the vertical structure of the public sector. It explores, both in normative and positive terms, the roles of the different levels of government and the ways in which they relate to one another through such instruments as intergovernmental grants.2

The Effects of Poverty on Children.

Abstract: Although hundreds of studies have documented the association between family poverty and children's health, achievement, and behavior, few measure the effects of the timing, depth, and duration of poverty on children, and many fail to adjust for other family characteristics (for example, female headship, mother's age, and schooling) that may account for much of the observed correlation between poverty and child outcomes. This article focuses on a recent set of studies that explore the relationship between poverty and child outcomes in depth. By and large, this research supports the conclusion that family income has selective but, in some instances, quite substantial effects on child and adolescent well-being. Family income appears to be more strongly related to children's ability and achievement than to their emotional outcomes. Children who live in extreme poverty or who live below the poverty line for multiple years appear, all other things being equal, to suffer the worst outcomes. The timing of poverty also seems to be important for certain child outcomes. Children who experience poverty during their preschool and early school years have lower rates of school completion than children and adolescents who experience poverty only in later years. Although more research is needed on the significance of the timing of poverty on child outcomes, findings to date suggest that interventions during early childhood may be most important in reducing poverty's impact on children.