Thursday, January 30, 2014

Public Finance Synopses

Synopses 1: Municipal Bonds
James Leigland, a development officer for the US Agency for International Development (USAID), describes how emerging economies can use municipal bonds for development purposes in his journal article “Accelerating Municipal Bonds Market Development Emerging Economies: An Assessment of Strategies and Progress,” published in Public Budgeting & Finance (Blackwell Synergy Press: June 1997 - Vol. 17 Issue 2 Pages 57-79).
In this comparative study, Leigland argues that the US municipal bond market may be used as a guide to compare how local governments in emerging economies stack up in developing this policy instrument for financing local infrastructure projects. Instead of a true comparison between US policies and the emerging economies, the author simply creates a construct based from the US’s 200 years of legal and procedural development to evaluate the local bond markets of Indonesia, the Philippines, Poland and South Africa. Notable is the outlandish task so often exerted by US based academics to make such tricky comparison of the developed and the developing world.
Nonetheless, Leigland evaluates the supply and demand for such municipal bonds by creating criteria so crucial to the US bond market development. After placing his construct in a chart, he later identifies cases in each of the emerging markets and how they stack up to investor and issuer attraction.  Items like freedom to invest, reducing government controls, acceptable return on investment, tax treatments and credit quality, tax supported debt all offer ways to look at the demand for such a policy tool.  Equally, he provides an analysis of tolerable borrowing costs, interest rates/ issuance costs, long term debt amortization, extended maturities, and assistance for small borrows for the demand of municipal bonds in emerging markets, and the list goes on.
Therefore, if Leigland’s main objective was to recreate essential market characteristics for policy makers to assess the municipal bond market in developing countries, he has succeeded. But his analysis is a bit muddled with the US market based comparison. If he had eliminated this comparison and highlighted fewer elements that stressed the importance for the supply (issuer attraction) and demand (investor attraction) for the municipal bond market to thrive, the article would be more readable and user-friendly for other countries to use in assessing this important investment tool for development.
Where as the author has ample knowledgeable about the various elements of municipal bonds, his naivety in comparing the US market with foreign markets is clear.  Strong guidance on how each country could improve their local markets should have been the main point of the piece.  Unfortunately, the article concludes with policy recommendations exclusively valuable to policy makers in Indonesia, the Philippines, Poland and South Africa. Larger lessons of how to develop the municipal bond market in emerging economies still needs further review.

Synopses 2:  Cost Effective Measures for Municipal Bonds
Craig Johnson agues to increase Indiana’s local income taxes, instead of its property taxes, to provide more cost effective municipal bonds, with lower interest rates.  In his article “Alternative Debt Financing Mechanisms for Economic Development,” published in State and Local Review (Vol. 28, No. 2, Spring 1996: 78-89), Johnson provides an empirical study, of 34 bond issues sold in Indiana, to evaluate the risks/benefits and trade-offs for policy makers when contemplating issuing municipal bonds for economic development.
Unfortunately, the author does not define economic development until the fourth page of the article. It is not just capital improvements one expects but more broadly defined as “projects that are expected to promote long-term employment for citizens, benefit community welfare and be consistent with neighborhood development,” which somehow also includes a shopping center mall in downtown Indianapolis. Johnson evaluates three mechanisms used to finance economic development in Indiana: economic development income tax (EDIT), property tax increment (PTI) and economic development lease rental (EDLR) bonds. Through a positive and significantly significant multivariable equation, Johnson infers that property tax increments are more expensive than economic development income tax to pay back government obligated bonds.
The author provides various policy recommendations suggesting that the government should think of lower interest costs to finance project with property taxes. He also recommends that bonds issued by third party signatories are less expressive than unrated bonds. Finally, competitive bid is the appropriate method of sale; it is even less expensive to sell securities that are negotiated and sold on competitive bids.
Interestingly, Johnson provides a background on Indiana’s Constitution, which allows approval for sub-national level to be indebted and local governments to sell general obligation bonds. A municipality must 1) not exceed two percent net assets value of tax property; 2) have citizen signatures or be approved by the Indiana State Board of Tax Commissioners; and 3) have a competitive bid, which are not allowed to negotiable.  Regrettably, the state’s additional requirements for each of the three financing mechanisms mentioned above make this study not generalizable to the larger policy debate.  It is virtually impossible to implement similar recommendation in another state, aside from another country, where property and income taxes are almost non-existent.
The article provides a good statistical analysis for comparing financing mechanisms for municipal bonds. However it does not provide generalizable policy recommendations, nor is there a sufficient debate regarding what constitutes economic development. Finally, additional attention should be paid to the fact that property taxes are more regressive than the income tax, which allocates more of a burden on the rich than the poor. Without further explanation of what the economic development projects constituted, suggesting to increase local income taxes to lower interest rates for the bonds is somewhat premature and irresponsible.

Synopses 3: The Retirement Crisis, Social Security, Public Retirement Systems
Chile is the leading country in the hemisphere to privatize its pension system.  In “The Structural Pension Reform in Chile: Effects, Comparisons with other Latin American Reforms, and Lessons,” Oxford Review of Economic Policy, (Vol.22 No. 1) authors Albert Arenas de Mesa and Carmelo Mesa-Lago provide evidence to that fact.  Unfortunately the authors, when providing such a lofty title, disappoint the reader, who would expect a true comparison with the rest of Latin America. The article instead—although it includes an excellent statistical analysis of how the pension reform has affected macroeconomic, microeconomic and social affects of the privatized system—is just another analysis of Chilean reforms. The authors simply add anecdotal evidence from the nine other Latin American countries with pension system reforms, without a true comparative analysis.
While under military rule in 1981, Chile was the first country in the region to reform its pension system.  So revolutionary for its time, Chile is often cited as an example even for the US states to copy.[1] Washington analysis may have used some results data to set up its own Thrift Savings plan (private) from the federal FERS program (public). As cited in the article, Chile reformed its pensions to decrease fiscal costs, increase national savings and capital accumulation, create capital markets and promote competition by creating many numbers of administrators (AFPs).  The program aimed to increase coverage to more men and women and the poor (indigent), contribute more density of funds while increase the levels of contributions. Arenas de Mesa and Mesa-Lago concluded with their 25-year analysis, that the Chilean system has developed confidence in the stock market, stimulate growth and help reduce debt and promote external investments.  But the private system has not met its social aims: less people are now coved with the private system (total coverage in 1972 was 79 percent compared to 2004 with 75 percent, even after adjusting for self employed); there are high gender inequalities—women, with longer life expectances, contribute less and allowed to retire sooner, receive less of a benefit; and the redistribution of funds to the lower tiers of society hasn’t happened.
The article does go into defining the reforms of the other Latin American countries highlighting that Chile (1981), along with Bolivia and Mexico (1997), El Salvador (1998) and the Dominican Republic (2003-6) have substituted reforms transforming public to privates systems; where Peru (1993) and Colombia (1994) created a parallel public system, where the public system is not closed but competes openly with the private investment firms; and Argentina (1994), Uruguay (1996) and Costa Rica (2001) developed a mixed public and private system where the first pillar is paid by the state and the second supplemented by the worker. (The US federal government uses the last option with its Thrift Savings Plan reformed in 1983). Unfortunately, the article does not use adequate data sets to evaluate the macroeconomic, microeconomic and social affects in a proper way.  Again this article would be more useful if its aim were more focused, by only analyzing the Chilean model, providing a policy analysis and recommendations and leaving out the comparison.

Synopses 4: Tax Incentives
In “Governance and Urban Revitalization: Lessons from the Urban Empowerment zones Initiative,” prepared for the conference on “A Global look at Urban Regional Governance: The State-Market-Civic Nexus” in Atlanta, Georgia, January 2006, Michael Rich and Robert Stoker wrote an ex-post evaluation for one of Americas most recent efforts to promote economic development: the Empowerment zones initiative. Their astute conclusion suggested that “[tax] incentives are important, but market-oriented tolls alone are not enough to spur urban revitalization.”[2] The study highlights the difficulty in measuring economic growth in a region. Even after using sophisticated statistical model, conclusions are tenuous.
Empowerment zones and enterprise communities was a federal policy tool enacted with the Clinton administration to provide special financing mechanisms, tax incentives and regulatory relief for over $100 million block grants to support local governance programs. The Round I grant authorized funding programs in Atlanta, Baltimore, Chicago, Detroit, New York and Philadelphia/Camden in 1993.  Highly contested, the program has been evaluated to death with a project component called Performance, Monitoring, Review and Management (PERMS) managed out of Housing and Urban Development office (HUD) and independently studied by the Government Accounting Office (GAO). EZ differentiated from Round II grants for Enterprise Communities, its subsequent program, which focused exclusively tax credits.
Rich and Stoker provide a comparative evaluation to the PERMS, GAO and Oates and Tsao (2006) studies arguing EZ were “not your typical federal program” but rather were tailored to the specific needs to the community. They quantitatively evaluated three factors: jobs production, poverty and unemployment rates, while qualitatively evaluate governance factors.  The “program” evaluation is not your typical, because local program outcomes varied between and within each of the empowerment zones (their emphasis provided.) Therefore they performed a quasi-experimental design with group comparisons, including a control group based on census data, but the treatment group included some of the control so therefore they also included propensity scores, to offset the covariates and dimensionality problem.  The authors concluded that the empowerment zones were not a success, measuring few statistically significant variables. Yet, they concluded some subprograms created measurable effects across cities with relatively strong associations with various in governance and civic capacity.
The last section focused exclusively to this point. It compared Atlanta to Baltimore qualitative results of the various governance factors. Since the federal program had no governance measurable or requirements, Rich and Stoker do an excellent job at identifying the various strengths of each of the cities programs, but this isn’t sufficient to explain why they feel that the EZ program effected measures of empowerment but not growth. Therefore more work in performance measures needs to be done in this area.  In addition to providing policy recommendations would have been helpful since the Round II EZ/ECs are currently being debated in Washington. 

Synopses 5: Tax Structures
Its hard to create an effective tax structure in a developing country was the general conclusion from “Financing Decentralized Development in a Low-Income Country: Raising Revenue for Local Government in Uganda,” written by Ivan Livingstone and Roger Charlton in Development and Change, Vol. 32 (2001). In this explanatory paper, the authors review Uganda’s decentralization laws and its efforts to provide effective taxing authority to finance social programs at the local level.  Without a full understanding of Uganda’s economy or political history, its decentralization efforts seem very progressive. Yet when once looks beyond this cursory evaluation, it is questionable how they have been able to effectively accomplish so much in such a short amount of time.
The first third of the paper describes how this country of 28 million people created 45 sub-national districts with political, administrative and fiscal authority since enacting laws in 1997. Most impressive is the right for municipalities to keep 50 cents per dollar of taxes raised for local consumption. Next the authors describe the three types of block grants available to municipalities: unconditional, conditional and equalizing. While Uganda is primarily a rural economy, it has very progressive laws to allow local governments to administer program and to raise their own revenues for programs. Next the paper describes the types of taxes and potential problems. Overwhelmingly there are compliance issues with the whole tax system, which exacerbates the delivery of services to the poor.
While the national government collects a graduated tax, market dues and licensing frees; and the municipal governments collects property taxes and land tax. With independence, Uganda collected a poll tax (like a head tax), which was eliminated and replaced with the graduated personal tax (GPT).  Initially suggested by the international finance institutions (IFI) in order engage peasant farmers into the cash economy, the poll tax was rather regressive in nature. The GPT is very complex—with six tax grades, administratively burdensome, and has unequal collection rates between jurisdictions. Most problematic is the harassment from local tax collectors, concluding killings and beatings for those who don’t pay.  The market dues are equally complex due to the lack of a real market mechanism to evaluate the real estate costs, which is made worse with high administrative weakness in some districts.  Additionally, there is lots of tax shifting and evasion from the business income tax. Apparently, local governments are more successful with the licensing and fees of business permits for operation, construction and development.  Property taxes are not evaluated at a proper market price and therefore are again hard to administer.  So much so that the system collapsed at the local level and is now limited managed at the national level. Finally land tax was proposed as an alternative to the GPT as a rural development charge related to the number of acres held. Yet there is a national and cultural hostility to pay tax on the land that is used so many skirt the payment.
Therefore, it maybe concluded that the tax system in Uganda is complex and sees many of the same problems a developed country faces in terms of tax shifts, indirect vs. direct costs, evasion, administrative burden and the like. Although the laws are in place, meeting them is more than complex.

Synopses 6: Tax Structures II
In his 1992 article, Richard Bird provides a comparative historic review of Latin America’s tax reforms entitled “Tax Reform in Latin America: A Review of Some Recent Experiments," published in Latin American Research Review (Vol. 27 No. 1).  Bird focuses his comparison on major “recent” reforms of the 1980s in Mexico, Bolivia, Argentina and Colombia, and describes Guatemala, Venezuela, Paraguay and Peru’s policy agendas in his footnotes. Although the article is outdated, the historic significance is useful for understanding long term tax trends in the region.
Through his analysis, Bird suggests that reforms originated in three ways: 1) macro-economic financial crises, citing Bolivia in 1985 and Argentina in 1989 after public strikes created massive public support for reforms; 2) a gradual process of adaptation to changing circumstances using Mexico and Colombia as examples; and finally 3) he questions possible reforms in counties like Venezuela, which is highly dependent on oil royalties to maintain the government (still an issues today).
According to Bird, Bolivia was most concerned about transforming its tax system into a highly equitable and transparent system.  The transformation was successful because it had widespread political support. It was highly simplified and emphasized effective administration with a broad based value added tax (VAT). In addition, it found sound enforcement mechanisms and an independent administration for managing collection and government disbursements. Interestingly, Bird suggests that administration reform, the management and collection of the taxes, was as important, if not more, as the kind of taxes (VAT, income, property, etc.) the Bolivian population was expected to pay. Major reforms included: the termination of import/export taxes, symbolizing the modernization of the economy; the increased consumption tax through the VAT; a small income tax throughout the country; increase of hydrocarbon tariffs (which are highly contested today); and finally concluded with the little emphasizes on property tax.  Through a footnote, Bird explains that property taxes were seemingly functioning as an effective tax for Latin America until residents of Bogotá revolted after the State tried to revalue of the property tax as an adjustment, which botched the system into termination.
From Bird’s full explanation of Bolivia’s past, he provides a straightforward comparison to the other countries indicated above. Of particular interest includes Argentina’s reforms for an attempt to create a flat-rate income tax at 20 percent and its simplification approach to eliminate loopholes for citizens. In Mexico, Bird explained the rising VAT rate to 15 percent in 1983 to meet additional governmental needs and highlights the countries concerns and possible constrains to tax collection imposed by the openness of the Mexican economy due to NAFTA. Finally Mexicans were also concerned with the equity real or perceived of the apparent system overall, which assisted with reforms. In Colombia, Bird points out there was a group of highly educated technician who assisted to make decisions for the future of their countries tax reforms.  Colombia’s reforms included inflation adjustments, a comprehensive income tax, but unfortunately ignored its own administrative liabilities for its collection.
To conclude, Bird’s history of Latin America’s tax reform uses an outdated writing style creating difficult application of the topics.  He also often lacks structure for his comparison, which aggravates this issue. Regardless, Bird provides the reader with some excellent substantiated information.

Synopses 7: Tax Administration
In this empirical study, Robert Taliercio, Jr. theorizes and tests four counties efforts to make their taxing administration independent from the political body. “Administrative Reform as Credible Commitment: The Impact of Autonomy on Revenue Authority Performance in Latin America” published in World Development Journal, (Vol. 32. No. 2, 2004) is more updated than the previous evaluation, but lacks a practical description of the content that the author is trying to explain. For example, instead of discussing horizontal equity, Taliercio uses the concept of “taxing fairness.” He provides statistical data to gather the perceptions of how people feel about the independence of taxing authorities from its political administration.  But each reader can understand the concept of “fairness” differently, if it is not defined further in the questionnaire, which was also not provided in the article as an annex.
There is no explanation to why the author concentrate on the developing world or why he chooses the counties he does for his analysis. Taliercio evaluates Bolivia, Mexico, Peru and Venezuela because this is where he distributed his survey to more than 100 agencies and taxing stations.  He does not include Organization for Economic Co-Operation and Development’s (OECD) countries in his analysis and randomly selects the four Latin American countries he does compare.  It is not clear to the reader if the same results would have been found for the developed and underdeveloped counties.
But for a more profound criticism, the article uses supercilious descriptions of a rather simplistic reality: in Latin America, as with the rest of the world, citizens value and independent taxing authority for collection, management and distribution of their public resources. Taliercio uses very sophisticated modeling to argue his effortless point. First the paper describes a theoretical framework, applies game theory of compliance for independent vs. co-opted taxing authorities. Then he argues why creditability of the board’s administration will make a more effective, competent and fair taxing authority. Next he tests the politician’s commitment to fairness, effectiveness and competences according to taxing authority’s overall performance through an econometric model. Yet, he does not include the survey in the article and does not explain the meaning for each of his variables. For example, administrative competence, effectiveness and fairness; political context, environment; etc. could mean radically different things for different people in the various countries he evaluates.  Although, Taliercio astutely points out that this perception is exactly what needs to be assessed when analyzing taxation in a developing country.  The perception of these values in the system that is important to measure. Yet, it is difficult to gather what he means by the dependent variable of administrative capacity and its over all quality and compliance of its service.  That “outcome variable” needs to be further defined in order for the reader to understand why a taxing authority is perceived to produce good policy/outcome/widgets, etc. That is the measure of how affective government is or “perceived” at doing its job.
Furthermore, Taliercio does not describe at what level of government, state, local or federal, that citizens perceive government is performing an excellent job. There is not sufficient explanation of how Bolivia, Mexico, Peru and Venezuela currently collect their taxes, what their major budget allocations are, or its effects on unitary vs. federal systems of government. Taliercio seems to test with modern techniques, what Woodrow Wilson explained more than a century ago, public administration and politics should be separate to be effective.

[1] The US comparison is my own. I tried to find an academic peer review journal on the TSP savings plan, but only found Social Security Bulletins on the subject.
[2] Stokers and Rich 2006 expand on this point with an evaluation of Bush administration’s GO ZONES initiatives to revitalize the communities affected by Hurricanes Katrina and Wilma in Aug. 2005.

Program evaluation notes

Program evaluation

1. Non-experiments
Means using R2 statistical analysis to find response.  Uses statistical controls (program variables x1+x2+x3) to analysis outcome measures (independent variable y)

2. Experimental designs-Random field experiments
Must Have
1.    comparison-random assignment of cases to experiment vs. control group
2.    manipulation- treatment should produce change in unit of analysis
3.    Control-internal validity (controlled through random assignment)
4.    Generalizabilty-external validity

    Must have 30 items in the sample
    Randomly selected
    Avoid selection threats

3 types of tests
1.    pretest post test
2.    pretest comparison
3.    salamon 4

Use simple statistics use t test or f tests
Ethical issues holding on reservation
Treats to validity, external depend on large sample size N
Never randomize to suite probs
Control many factors- get selection treats
Simple to understand

Cause group doesn’t explain why
Not always feasible
Not always generalizable
Lots of internal threats – instrumentation- multi-treatment- self selection-attrition
Must have large N

With randomized field experiments,  you can get the closes to causal inference, based on random assignment of program and control groups.  Lottery is a randomized field experiment.  Yet it is not the most efficient way to redirect scarce resources.  Each group must be large (greater than 30)  and be composed of the same % of sex, race, characteristics.   Select numbers run program on one group and not on the other. We only need random assignment not random selection. If the numbers are less then 30 you can not do random assignment but must do a quasi-experiment. Unit of analysis is important.

3.    Quasi-Experimental Design
Absence of random assignment makes QE different than experimental design, tend to be retrospective.  Internal Validity more questionable Selecting unit of analysis or variable that could be effective and related to treatment selected comparable places
 3 types
1.    cross sectional- experiments with comparable units XS
2.    Time series- before and after treatments- TS
3.    Both cross sectional and time series- comparison before and after time series

Types of studies:
1.    No comparison
a.    descriptive case study- not good program evaluation
2.    Posttest Only comparison group
a.    Threats to valid causal inference, who knows if program caused difference, or if it was another variable.
3.    Pretest-Posttest Comparison Group
a.    You should have baseline data for this formula.
b.    You control for self selection bias
c.    Random assignment would help separate groups
4.    Pretest-Posttest
a.    2 data points- not strong design, history and maturation problems?
b.    Have baseline data
c.    Yet can´t claime effectiveness of program –other variables may effect group
5.    Interrupted Times Series
a.    strength control for maturation yet no comparison, selection threats, purely reflexive design
6.    Interrupted Times Series Comparison Group- many different levels o interventions

4 types of Validity

A.  External Validity = must be generalizable
1.    Time not general range of economic growth
2.    Place- not general to all US but specific place
Solved by having a Large N with random selection

B.  Measurement Validity
•    Reliability – absence of random error
•    Validity—absence of non-random measurement error

Best way to reduce both –multiple indicator to explain differences with random measurement error
3 types of measurement validity
1.    face values-measurement instrument really measure what it is suppose to
2.    concept-construct- is measured indicators related to one another
3.    predictive validity- score on GRE- how well you will do in school? The valid measurement will yield the correct outcome.

C. Statistical Conclusion Validity- refers to the accuracy with which system affects are separated from random effects (stochastic affects=
    Sources of randomness
1.    sampling error
2.    random measurement error
3.    inherent in human behavior
4.    small sample size
Soled by having a larger N sample
If studying a population use statistic test to nullify- need large N

Type 1 error is finding a program effective when it is not
•    reject the null hypothesis lower levels of significances
•    academic research focuses on it
•    F= low
•    reject null

Type 2 error is finding no effect when the program is effective
•    Accept the null hypothesis
•    Beta program evaluation focuses on
•    F= high
•    Accept the null kill the program
•    Policy analysis must focus on type 2 errors

How do determine the power of a tests
1.    frequently use increase level of significance, measure powerful test
2.    use .05 level of sig. As base

D. Treats to Internal Validity
Problem with internal validity it is impossible to prove causal claims, no study is accurate.  Some studies have mere internal validity treats than others . How to improve internal validity design matters.

1.    History (TS) an event other than the change in the treatment (x) might cause the outcome (y) to change  (single event)
2.    Maturation (TS) Y man be changing partly because of underling trend and not because of treatment (x)
3.    Testing, (TS) while taking a test, no change in treatment, may cause the outcome (y) to change – external and internal treat (aware of being studied)
4.    Instrumentation (TS, CS) change in calibration of measurement procedure or instrument may partly or entirely cause the outcome (Y) to change, rather than the treatment – change treatment causes outcome to change
5.    Regression artifacts (TS, CS)  extreme high or low scores chosen often, there is a tendency for extreme scores to return normal.  Chose highest more likely to go down.
6.    Selection (CS) when the group to be compared differ on factors besides treatments (x) than these differences (z) may account partly or entirely for the observed difference in outcome (y). example public vs. private schools
7.    Attrition (TS) when 2 or more groups are being compared, observed between-treatment difference in outcome (y) may be partly or entirely attributable to a differential loss of respondents rather than to the treatment (x)
8.    Multiple treatment interference (TS,CS) when one treatment (x1) is confounded with another (x2) that it is impossible to separate the impacts of one to the other
9.    Contamination (CS) when one group finds out about the treatment and there is no difference in outcomes (y)

Statistics Review


This is a non-experimental design:  main program (x) is either continuous or categorical: matching or keeping groups comparable is mostly or entirely more multiple statistical controls designated as a vector of control variables, collectively labeled as z.  Outcome variables are y.

1. Estimate Evaluation
Y= A,+ B, X, + B,,X,,+ B,,,X,,, ... + e

B= Parameter estimates


2. Interprets that
            each unit change in X, changes Y, by B,  holding everything content

3. Discuss significance:

  • The t test= significance if the X’s are greater than 2 or less than –2, and the coefficient is significant in difference than 0

  • R square  is the % of variation in y explained by the variation in X

  • Adjusted R2 = percentage of variation in Y explained by the variations in the x’s

  • The f test= if variation in the x’s f prob. Is greater than .05, than the r squared (r2) is statistically significant

4. Evaluate the model
  • Omitted and irrelevant variables
  • multi-colinearity
  • hedorasticity
  • auto or serial correlation

Assumption for Parameter Estimates X independent

Question: what do the letters mean E(u)=0
  1. E(u)=0 In general, this assumption means that any independent variable you couldn’t think of to include in the analysis are just noise- they have no impact on the dependent variable
  2. no random or non-random measurement error in X
    1. Random measurement error-data collected form human responses, recording or transcribing data, etc.
    2. Non- random error- the extent to which a measure reflects the concept it is intend to measure.  An example of non-random error would be if I am trying to measure impact of 9-1, and I include an unrelated variable like pilot hair color, that would not non-random error. At the same time, if I purposely leave out an important variable such as daily number of airline passengers in the past 12 months, that is also non-random error.
  3. No random or non-random measure in Y
  4. No correlation between x and unmeasured-unobserved variables
    1. This means no omitted variables- selection bias
    2. No simultaneity- or it has to be clear that the independent variable impacts the dependent variable and no the other way around
  5. Must have linear functional form
    1. If you have significant independent variables and a low R-square, you may have poor linear function form which means that using a linear regression equation is not appropriate

Assumptions need to believe significances test for X
  1. No autocorrelation-observations must be independent of one another.  If observations are not independent, you cannot trust the accuracy of that variable. This can be a problem in:
    1. A time series design- observations from time 1 not independent form time 2
    2. Cross sect oral data- for example if you are observing a whole group of people at the same time and are trying to keep data of each person in the group individually.  Each person in the group is impacting the other people in the group so the observations are not independent

  1. No Heteroscedasticity- if the variance of the error term is not constant for all observation there is heteroscedasticity.  For example, if you were trying to measure the impact of gun legislation on gun related death in the US by collecting CS data from all 50 states, there would probably be heteroscedasticity.  The reason is that with such varying populations, the variance in the error term would be different with different populations.
    1. Look for it in
                                               i.     CS data or TS mostly cross-sectional
                                             ii.     Aggregate data- like states each unit has a different N
                                            iii.     Test scores or policy opinions
                                            iv.     When dependent is spending and independent or control is income

  1. No severe co linearity (same as mulicolinearity) There can be no significant relationship among independent variables If there are R-square will be high and independent variables will be insignificant
    1. Example I am using hair color and ethnicity as independent variables in a regression, neither will be significant because they are highly related.

  1. Omitted variables: things that should have been controlled for but were forgotten should be listed at the end
  2. Random measurement error
    1. Reliability output and Validity in Design
    2. Human error- people write in something,
    3. Large sample for less random error
    4. Can control just by adding more samples
  3. Non-random measurement error
    1. make a mistake or human bias, can’t be predicted
    2. irrelevant variables- put into regression
    3. measure validity
    4. measuring hair when you want weight
    5. control by design

Measurement reliable- random measurement error is absent
Measurement validity- non random measurement error

3 .x=independent
v= obscure variables
omitted variables is the relationship between variables

Regressions: what to know, if we have x can we determine with y? Is there a correlation between the 2 variables?

  • R is between              –1        0          1+
 Zero is no correlation
-1 is negative perfect correlation
+1 is positive correlation

  • R square  The coeffeicent of determination tells the % of variation in the dependent variable (y), explained by the independent variable (x).

Total variation explained is the sum (y-y)2
If I know x can improve my perditions of y over using the man score to predict

linear regression:  y= a (intercept) + b (slope) x

r squared is the improvement in perdition of the score from using the mean
slope is also the regression coefficient

Thursday, January 23, 2014

XX Inter-American Conference of Mayors and Local Authorities

XX Inter-American Conference of Mayors and Local Authorities | « Back to Event List
Do not miss the 20th anniversary of the conference which gathers the best practices and local governments from throughout the hemisphere.

The Inter-American Conference of Mayors and Local Authorities will take place in Miami, FL from June 9th through 12th 2014.

Please save the date so you can join us!

Primera Conferencia para el Desarrollo de la Democracia y la Prestación de Servicios Públicos

Primera Conferencia para el Desarrollo de la Democracia y la Prestación de Servicios Públicos | « Back to Event List
El objetivo de la conferencia es intercambiar ideas y experiencias para la construcción y fortalecimiento de la democracia en las Américas. En ese contexto, la Conferencia analizará el rol de los parlamentos, los partidos políticos, y miembros del poder ejecutivo entre otros, en el fortalecimiento de la gobernabilidad democrática. Asimismo, el análisis del tema de “retroceso en la democracia” en el hemisferio tendrá gran relevancia dentro del marco del evento. La conferencia también considerará temas de estabilidad y crecimiento económico que son fundamentales para el intercambio comercial entre la Florida y la región.

La Conferencia se llevará a cabo en el Hyatt Regency Hotel en Coral Gables, Florida el 28 de febrero de 2014, con una recepción de bienvenida la noche del 27 de febrero. Es un placer para nosotros invitarle a visitar la página web de la conferencia en para obtener información adicional. Distinguidos panelistas de América Latina, Estados Unidos y de otros países compartirán sus experiencias con nosotros. 

Time: Thursday, February 27, 2014 @ 07:00 PM
Venue: Hyatt Regency Hotel - Coral Gables
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The Energy and Climate Partnership of the Americas

The Energy and Climate Partnership of the Americas (ECPA) is the outcome of U.S. President Barack Obama's call for a collaborative effort to mitigate the effects of climate change across the western hemisphere. ECPA is an umbrella of initiatives that partner public, private, and academic organizations to promote sustainable development, the use of alternative energy, and the elimination of poverty. APA petitioned the State Department to conduct an ECPA initiative, firmly believing that urban and regional planning can play a key role in achieving core objectives.
Recorded Facilitated Discussion
Latin American NGO Growth and Management and Urban Planning
Stream the recording of an April 2013 session that brainstormed ideas to improve the planning efforts of NGOs South of America's border. The presentation features discussions in English, Spanish, and Portuguese.
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Sustainable and Inclusive Housing and Community Development Program

Stemming from another grant funded by the US Department of state, APA is implementing urban housing strategies in Latin America APA is assisting and collaborating with four demonstration projects in Latin America, which address some of the most important issues in comprehensive regional planning and urban housing today.
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The ECPA Urban Planning Initiative

ECPA Urban Planning Initiative is funded by the U.S. Department of State and led by APA. This initiative supports Latin American and Caribbean based planning projects geared towards addressing the challenges presented by climate change. According to the United Nations 2010/2011 State of the World's Cities Report, these regions are the most urbanized in the developing world, with more than 79 percent of the population living in cities. The ECPA Urban Planning Initiative supports local projects that help Latin American and Caribbean cities to become more energy efficient, economically robust, and equitable; furthering these urban environments' resiliency to climate change.
The ECPA Urban Planning Initiative maintains multinational partnerships to build equitable communities of lasting value that are both economically and environmentally sustainable. Under this collaborative program, APA provides opportunities designed to improve institutional capacity, knowledge sharing, and expand long-term access to planning expertise and technical assistance throughout the Americas.

ECPA Urban Planning Initiative Goals

  • Support and develop locally based governmental, non-governmental, and academic civil society and planning institutions within Latin America and the Caribbean
  • Build urban planning capacity in Latin America and the Caribbean to make communities become more climate change resilient, equitable, and economically robust
  • Identify useful and transferable programs and projects and engage officials with effective knowledge-sharing strategies across the hemisphere
  • Provide and support academic, professional, and technical exchange

Join the Partnership

To help facilitate this collaboration, please join the ECPA Academic and Professional Urban Planning Network at This interactive network is for anyone interested in engaging with urban planners and allied professionals from across the Americas on issues of energy, climate, and sustainable development. By joining, you'll be able to participate in the dialogue associated with the ECPA Urban Planning Initiative and the latest projects, events, and other opportunities.

For more Information

For the latest research, innovative ideas, and to read more please visit the ECPA Urban Planning Initiative website at
To speak with the ECPA Urban Planning Initiative team by e-mail Jennifer Graeff, International Program Manager with APA or Thomas Bassett, Senior Program Associate with APA; or phone APA's Washington, D.C., office at 202-872-0611.

Past Activities

Manifestations and Response: Urban Grievances in Latin America

Manifestations and Response: Urban Grievances in Latin America

Latin American Studies Ass (LASA) Panel Description

This panel brings together a unique set of papers examining the ways in which citizens present their grievances and elicit responses from city governments throughout Latin America. Papers on Brazil, Peru, and Mexico detail the conflicts that arise when development policies clash with the rights and demands of urban citizens, while Esser presents the striking results of a survey documenting why and how citizens express their grievances in the face of tremendous violence. Further, Smith and Benton study  international capital markets and their effects on finances cities in Mexico.  Mesa and Ramirez both document the policy making process in which governments face both financial and political constraints to incorporating citizen interests.

1. Resisting Urban Development: Social Movements and Megaprojects in São Paulo, Brazil

Maureen Donaghy
Assistant Professor
Departments of Political Science and Public Policy and Administration
Rutgers University

Cecilia de Morais Machado
Post-doctoral fellow, Universidade Federal do ABC, São Paulo, Brazil

What is the role of social movements in communities impacted by urban megaprojects? In rapidly developing cities, large-scale infrastructural development produces both environmental and social challenges around which social movements seek to protect the interests of residents. In São Paulo, Brazil, both environmental and housing movements mobilize around the issues related to construction for transportation projects in the periphery of the city. While both movements claim to represent the interests of residents, their separate agendas threaten to weaken the impact of both groups in securing benefits, permanency of tenure, and safe conditions for residents. In this paper we review the case of movements contesting the construction of the northern beltway in the city. We seek to assess three questions: 1) how the interests of environmental and housing movements do and do not coincide, 2) how each movement chooses and implements strategies; and 3) how the coordination and conflicts between movements serve the interests of community members. Through this analysis we provide further evidence towards understanding the repertoires of current urban social movements and their role in representing the democratic rights of citizens. Further, like in other cities around the world, as new social movements seek to coalesce around urban issues following mass protests, we aim to review how diverse interests may either help or harm the ultimate outcomes for low-income residents. 

2. Housing for Whom? The Institutionalization of Homeownership in Peru
Lauren Ross
Doctoral Candidate
Temple University 

Over the past 20 years, housing finance has grown in many developing countries – bundled in policies that promote neoliberalism and integration in global financial markets. With considerable support from national governments and international financial institutions, institutionalized mechanisms for housing finance have been developed to increase the availability of mortgage credit. In Peru, efforts to expand formal, mortgage-backed homeownership for greater segments of the population have been the primary housing solution carried out by the national government. Interviews with public and private officials indicate that the Peruvian government (seeing what was considered good practice elsewhere through the lenses of international financial institutions) saw housing as part of larger strategies to generate urban investment and promote the financial sector. The policy that emerged targets the segment of the population that is able to pay for housing with basic leverage from public policies – the middle and middle-upper classes. The local manifestations of these policies have resulted in a series of local-national conflicts around the use of urban space and the best way to reduce the housing deficit. These processes reveal the inherent challenges of a housing strategy that emerged as an appendix to financial market reform and its effect on the urban landscape. Overall, findings will describe how the institutionalization of homeownership is affecting urban governance and development at the local level and serve as an important case study on how we might start thinking about this in emerging economies whereby urban environments are increasingly shaped by the availability of mortgage credit.

3. Political Determinants Of Municipal Debt: Explaining Borrowing Patterns Of Mexican Cities

Heidi Jane Smith, 
Visiting Professor, ITAM, Mexico

Allyson Benton
Professor/ Researcher
Centro de Investigación y Docencia Económicas A.C. (CIDE)

Mexican municipalities have increasingly accessed both private capital markets as well as public sector lenders since the 1997 reforms to Article 9 of the National Fiscal Coordination Law. Some municipalities have seen their private and public debt burdens skyrocket, while others have not acquired public debt at all. Some municipalities have chosen to raise their relatively less expensive private sector debt loads, while others have chosen to access more costly public credit sources. This study joins public management and political economy research to explain the administrative foundations and political decisions behind Mexican municipal debt profiles. Statistical analysis of municipal debt portfolios overtime will show the important role of administrative hurdles for preventing some municipalities from building a balanced debt portfolio, but that partisan bias and other political factors also come into play in determining the level and type of debt assumed.

4. Gender, Faith and Victimization: Catalysts of Collective Action Amid Violence in Ciudad Juárez

Daniel E. Esser
Assistant Professor of International Development
American University

The paper presents findings from survey research conducted in late 2012 on civic responses to violence in Ciudad Juárez, Mexico between 2008 and 2012. The data show that despite generally unfavorable conditions for collective action, residents of what used to be the world’s most murderous city engaged in a variety of collective coping mechanisms ranging from vigils and protests to patrols and barricades. The paper explores economic, psychosocial and institutional approaches to explaining what might have motivated the pattern of activities observed. A subsequent statistical analysis produces results that confirm some prominent theoretical propositions while challenging others. Although residents with a longer duration of tenure in Juárez as well as those living in smaller households were more likely to have partaken in faith-based groups, the strongest predictor for faith-based engagement was the personal experience of victimization. The latter was correlated further with participating in community watch groups. With regard to collective action aimed specifically at preventing and coping with victimization from crime, men were significantly more likely to engage in community initiatives to take back space, such as fencing off cul-de-sacs to create safe zones with restricted access or hiring security guards. Such actions were also significantly more likely to be taken by lower-income respondents as well as respondents who reported knowing victims of kidnapping and disappearances. Those participating in faith-based activities were, rather unsurprisingly, likely to conduct vigils. Similarly unsurprising, those reporting active membership in community watch groups were significantly more likely to engage in street monitoring, seeking arrangements with local police or cordoning off streets. Remarkably, the latter two activities were predicted almost equally well by active political party membership. Finally, residing in low-violence neighborhoods was associated significantly with active participation in street monitoring as well as reporting existence of community watch brigades and street closures in these areas. It seems plausible that residents of less violent neighborhoods were thus able to capitalize on relatively more conducive conditions for collective action than those faced by residents of neighborhoods with a high incidence of homicide during the reporting period.

5. Institutional Environment Of Policy Agenda: Who Plays, Why And How?

 Oliver D. Meza, 
PhD, Centro de Investigación y Docencia Económicas A.C.
Associate professor University of Guadalajara, México

Local mobilizations are seen as social responses towards economic or political enterprises. However local organizations lobby too, promoting (or to stop) policy items going into governments agendas. While influence between these two variables is well studied, other systemic factors may be influencing both; either social organized actions and local agendas. I present a study comparing three groups of municipalities; each of them accounts for a different story on the relation between local interests and influence on local government’s policy agenda. Along the analysis, noticeable differences were observed between each of these three groups of case studies. Actors engage in governance processes according the type and scope of laws local legislature approve. Authorities’ pool of resource varies and such constrains what local governments do. Geopolitical and economic importance of localities reshapes relations between local and state governments, or among neighbor local governments affecting policy priorities and incentives. These different institutional environments influence not only how local government shapes their agenda but also how other socioeconomic and political organizations take form. The research heads towards a local policy making theory helping to pinpoint different set of structural and systemic factors that also play an important role in local policy making.

6. El desarrollo urbano sustentable como política redistributiva: cambios en los derechos de propiedad e impactos sociales

Edgar E. Ramírez de la Cruz
Professor/ Researcher
Centro de Investigación y Docencia Económicas A.C. (CIDE)

La forma urbana está estrechamente relacionado con las políticas sustentables, sobre todo cuando se intenta promover una forma compacta de crecimiento. En general, se considera que al ser una política sustentable implica mejorar el bienestar de las personas, elevar los niveles de vida y mejorar condiciones generales de la población. Sin embargo, como cualquier política, ésta tienen serias consecuencias redistributivas son en general poco entendidas y estudiadas. En particular es limitado el entendimiento que tenemos sobre como las políticas asociadas al desarrollo sustentables afectan los derechos de propiedad de las personas. Esta situación representa un serio descuido, sobre todo si consideramos que estos efectos redistributivos afectan las preferencias de las personas y tienen el potencial de generar otros efectos inesperados y contrarios al objetivo inicial. Con el fin de llenar este hueco en la literatura, el presente documento busca identificar la reasignación de los derechos de propiedad (Alchian y Demsetz, 1973) y los efectos redistributivos de dos políticas urbanas asociadas a la forma compacta y al desarrollo sustentable. En particular, la Ciudad de México ofrece dos ejemplos destacados de este tipo de políticas: el Bando Informativo número 2 (B2) del año 2000 y algunas modificaciones instrumentadas desde 2006 al proceso de conexión a la red de agua potable para nuevas construcciones.

Metropolitan Cooperation and Administration in Mexico

The Role of Metropolitan Cooperation and Administrative Capacity in Subnational Debt Dynamics: Evidence From Municipal Mexico Authors ...