Infrastructure and social welfare in metropolitan America

Public infrastructure investment may indirectly affect firm productivity and household welfare through its impact on the location of economic activity. Existing infrastructure policies encourage firms and households to move from dense urban environments to the surrounding suburbs. Nevertheless, several recent studies have suggested that the concentration of producers and consumers within cities results in "agglomeration economies" that are socially beneficial. In light of these findings, the author recommends the creation of infrastructure investment authorities that would have the power to select and finance projects that promote the overall well-being of a given region. Such authorities would most likely direct a larger share of infrastructure investment to the central cities.Industrial location ; Infrastructure (Economics) ; Investments ; Public welfare

Fiscal policy in New York and New Jersey: 1977-97

Between 1977 and 1997, real government spending in New York and New Jersey rose more than 40 percent, led by sharply higher outlays for public welfare and education. Increased tax revenues offset the spending hikes, allowing the states to run large cash surpluses in most years, but both states saw their long-term debt grow markedly. As a result, net financial wealth rose only marginally in New Jersey and declined slightly in New York over the twenty-year period.Fiscal policy ; Taxation - New Jersey ; Taxation - New York ; Public welfare

Exogenous shocks and the dynamics of city growth: evidence from New York

This article was presented at a conference organized by the Federal Reserve Bank of New York in April 2005, "Urban Dynamics in New York City." The goal of the conference was threefold: to examine the historical transformations of the engine-of-growth industries in New York and distill the main determinants of the city's historical dominance as well as the challenges to its continued success; to study the nature and evolution of immigration flows into New York; and to analyze recent trends in a range of socioeconomic outcomes, both for the general population and recent immigrants more specifically.Economic conditions - New York (N.Y.) ; Federal Reserve District, 2nd ; Urban economics ; Terrorism

The recession's impact on the state budgets of New York and New Jersey

In the wake of the most recent U.S. recession, both New York State and New Jersey have faced multibillion-dollar budget gaps. An analysis of the makeup of their budgets reveals that the states' heavy reliance on personal income taxes--particularly from high-wage earners in the finance sector--has exacerbated revenue shortfalls. To close their budget gaps, New York and New Jersey have had to make difficult choices about tax increases and service cuts. In the future, the states might take steps to avert such budget quandaries by establishing "rainy day" funds or restructuring taxes to make them less sensitive to the business cycle. Subseries: Second District HighlightsBudget ; State finance ; Federal Reserve District, 2nd ; Recessions ; Economic conditions ; Budget deficits

Revenue implications of New York City's tax system

A study of New York City's tax system finds that over the past three decades, the system has become less reliant on property and general sales taxes and more dependent on corporate and personal income taxes. This shift has made the city's tax revenues less stable than the revenues of the 1970s and more sensitive to cyclical swings.Taxation - New York (N.Y.) ; Revenue ; Federal Reserve District, 2nd ; Local government

On the optimal design of disaster insurance in a federation

Recent experience with disasters and terrorist attacks in the US indicates that state and local governments rely on the federal sector for support after disasters occur. But these same governments are responsible for investing in infrastructure designed to reduce vulnerability to natural and man-made hazards. This division of responsibilities – regional governments providing protection from disasters and federal government providing insurance against their occurrence – leads to the tensions that are at the heart of our analysis. We show that when the federal government is committed to full insurance against disasters, regions will have incentives to under-invest in costly protective measures. We derive the structure of the optimal second-best insurance system when regional governments choose investment levels non-cooperatively and the central government cannot verify regional investment choices. Normally (though not always) this will result in lower intergovernmental transfers and greater investment. However, the second-best transfer scheme suffers from a time-inconsistency problem. Ex-post, the central government will be driven towards equalizing rather than the second-best grants, which results in a type of soft budget constraint problem. Sub-national governments will anticipate this and reduce their investment in protective infrastructure even further. We discuss these results in light of recent disaster policy outcomes in the US

Fiscal Policies in Open Cities With Firms and Households

This paper provides an equilibrium numerical model of an open city economy with mobile firms and resident workers. Given household preferences and firm technologies and an exogenous configuration of city tax rates and national grants and fiscal mandates, the model calculates equilibrium values for aggregate city economic activity, factor prices, and finally, local tax bases, revenues, and public goods provision. The model is calibrated to the Philadelphia economy for Fiscal Year 1998. We then explore the economic and fiscal consequences of raising city tax rates and the city’s ability to finance rising local welfare payments. We find the city to be incapable of bearing significant increases in local responsibility for welfare transfers