Study shows overrepresented populations tend to receive disproportionate share of national funds

May 11, 2011 by Bob Yirka report
Log of the relative intergovernmental transfer index against the log of the representation index for each country, using averages over the entire time period for each country. Image (c) PNAS, doi: 10.1073/pnas.1019061108

(PhysOrg.com) -- In a new study published in the Proceedings of the National Academy of Science (PNAS), authors Tiberiu Dragu and Jonathan Rodden show that many of the world’s democracies aren’t nearly as democratic as might be thought, at least when it comes to doling out cash from the central government. After careful statistical analysis, they show that less populated areas tend to get more money per capita than do those that are more heavily populated, resulting in inequities slanted towards more rural areas.

By studying nine democratic countries (federations) that collect money via taxes and then dole out that cash nationally, the authors were able to very clearly show that states or provinces that are sparsely populated almost always receive more money per person than do those with bigger populations. This comes about, they say, as a result of the way populations are represented in their national governments.

In the United States, for example, every state gets two senators, regardless of population. This means each state gets two votes on every issue that arises, which of course includes funding for projects and social programs. If two states, one sparse (Vermont for example has just over 600,000 people) and one heavily populated (say California, with a population of over 37 million), both receive grants of equal amounts to build a highway, say a hundred million dollars each; calculating the amount received per person in that state is as simple as dividing the total amount of money received by the number of people in the state, for that project, which would result, obviously, in a much higher number for the sparse state (166.7 million for Vermont, as opposed to 2.7 for California). This inequity, the authors point out, might not seem like such a big issue in already well established countries, but can be a serious sticking point in countries (such as Iraq, perhaps) that are still trying to move towards democracy. And of course, it’s not as cut and dried as all that because states with larger populations such as California, do receive far more funds overall, then do less populated ones; but as the authors note, the data shows that the sparser states, after all is said and done, do get a better deal.

Many previous studies have been done on this issue, leading to the same result; the difference with this study though, is that it focused on many countries, not just the United States, and used several decades of actual historical data to show that it’s not just the U.S. that has such inequities, but most modern developed democratic nations. The data, they say, also shows that it’s not the that has the biggest differential; it’s Brazil, where the sparsest states get up to five times the amount per capita, over those in the densest states, such as Sao Paulo.

The bottom line is, if federations wish to govern democratically, they should take a closer look at the data in studies such as this, before parceling out funds.

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More information: Representation and redistribution in federations, Tiberiu Dragua and Jonathan Rodden, PNAS, Published online before print May 9, 2011, doi: 10.1073/pnas.1019061108

Abstract
Many of the world's most populous democracies are political unions composed of states or provinces that are unequally represented in the national legislature. Scattered empirical studies, most of them focusing on the United States, have discovered that overrepresented states appear to receive larger shares of the national budget. Although this relationship is typically attributed to bargaining advantages associated with greater legislative representation, an important threat to empirical identification stems from the fact that the representation scheme was chosen by the provinces. Thus, it is possible that representation and fiscal transfers are both determined by other characteristics of the provinces in a specific country. To obtain an improved estimate of the relationship between representation and redistribution, we collect and analyze provincial-level data from nine federations over several decades, taking advantage of the historical process through which federations formed and expanded. Controlling for a variety of country- and province-level factors and using a variety of estimation techniques, we show that overrepresented provinces in political unions around the world are rather dramatically favored in the distribution of resources.

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jscroft
2 / 5 (4) May 11, 2011
Easy solution: quit handing out "national funds," and then quit COLLECTING the taxes that are no longer needed. Problem solved!
pauljpease
4.5 / 5 (4) May 11, 2011
Easy solution: quit handing out "national funds," and then quit COLLECTING the taxes that are no longer needed. Problem solved!


Just remember that most solutions create new but different problems. I can think of a few that your "easy" solution would create. For example, with your "solution" everybody would have to move to cities because the maintenance cost for all of the rural roads and highways, which serve small numbers of people, would be prohibitive.
that_guy
5 / 5 (3) May 11, 2011
I think the author of the study did a disservice by refusing to examine the underlying causes of this case.

As paul states, building a highway from one city to the next all counts as rural funds - However it greatly benefits the cities and facilitates commerce.

And extra capital costs are unavoidable. Drop a post office in the middle of the city, and it will serve a huge population. Drop it into a town, and the cost of the building vs the served population ratio changes. This applies to virtually all government services (The post office technically is supposed to be self sufficient.)

The researcher should readjust his study to only account for services directly attributable to a population, adjust for capital costs, and then give us a study with rhyme and reason on what's left.
paulthebassguy
3 / 5 (2) May 11, 2011
What this study doesn't seem to take into account is the value of the rural area to the nation.

For example, in New Zealand, rural areas that are sparsely populated with people get infrastructure funding which seems a lot when you divide it on a per-person basis, but the VALUE of these rural areas to the GDP of the country is very high.

If it wasn't for the infrastructure then farms wouldn't be able to operate efficiently, GDP would decrease, and then every person, even in the populated areas, would be worse off.

Instead of comparing state funding with populations, we should compare it with value.
COCO
1 / 5 (1) May 12, 2011
In Kanada farmers get over 65% of their income from their post box (Federal and Provincial hand-outs)- it keeps the countryside populated with a superclass of rural welfare recipients - the cost can be handled in Kanada as we are one of the most urban societies on the planet - but is NOT sustainable.
damnfuct
3.7 / 5 (3) May 12, 2011
In Kanada farmers get over 65% of their income from their post box (Federal and Provincial hand-outs)- it keeps the countryside populated with a superclass of rural welfare recipients - the cost can be handled in Kanada as we are one of the most urban societies on the planet - but is NOT sustainable.


What are you talking about? Are you even Canadian?
jscroft
2.3 / 5 (3) May 12, 2011
Drop a post office in the middle of the city, and it will serve a huge population. Drop it into a town, and the cost of the building vs the served population ratio changes. This applies to virtually all government services (The post office technically is supposed to be self sufficient.)


FedEx has to solve precisely this problem... yet they manage to provide ubiquitous service at a profit. Another example of the inherent superiority of private industry to Government!
that_guy
4.5 / 5 (2) May 12, 2011
@js...You do realize that the post office operated at a profit for over a century right? and that private services went belly up during that time. you do realize that history goes back farther than 2 decades, right?

And you do realize that it costs a buck and a half to deliver a letter through ups and fedex right? that essentially they're shipping companies and not mail companies, because they aren't as efficient in delivering mail as the post office.

and you do realize that the only reason the post office didn't post a profit this year is because of congressmen who don't want the post office to close one in their districts (Which are usually republican)

and you do realize that there are plenty of government services that private industry won't pick up. and you...

You know what, nevermind js, you're just a narrow minded idiot.
jscroft
1 / 5 (1) May 13, 2011
You do realize that the post office operated at a profit for over a century right? and that private services went belly up during that time.


Given that the Post Office was founded in 1775, I'm not sure why I ought to be impressed. And private services go belly-up ALL the time... generally because they were put out of business by BETTER private services.

And you do realize that it costs a buck and a half to deliver a letter through ups and fedex right?.


Hey, you've identified the actual cost of sending a letter! Does the post office charge less? Maybe THAT's why they run at a loss!

and you do realize that the only reason the post office didn't post a profit this year is because of congressmen who don't want the post office to close one in their districts


... yet there are FedEx offices in all those districts, and THEY run at a profit! Hmmm...

(Which are usually republican)


Oh, well, that's okay then.
jscroft
1 / 5 (2) May 13, 2011
and you do realize that there are plenty of government services that private industry won't pick up.


Won't, or CAN'T because Government has arrogated those monopolies to itself?

You know what, nevermind js, you're just a narrow minded idiot.


... who apparently can argue rings around you anyway. That has to annoy the hell outta you.
that_guy
not rated yet May 13, 2011
I stand corrected. You are right - the post office has been profitable for most of 2 centuries, not one.

Not a single tax dollar has gone to the post office since the early 1980s (When the post office was reorganized as an independant unit of the govt). Businesses do have some unprofitable years. That doesn't mean they need a bail out every time.

Lets run some facts js. I just researched letter rates through fedex, ups, and dhl. The cheapest rate I could find was 7 dollars.

Vs 42 cents with the post office.

The post office processes 170 billion pieces of mail a year. To make it profitable this year would require less than 1 cent surcharge per piece to return to profitability.

As a thinking person, i certainly believe that the Post office could be improved - that it should be allowed to run without special interests messing things up, but overall as a letter carrier, it is by far the best option in place.
that_guy
not rated yet May 13, 2011
So, the post office has competed without losing money (overall) since the time that UPS, Fedex, and dhl rose in the 80s, at 1/14th of the cost to us.

I mentioned the republicans, because they are what is holding the post office back. The small government party is trying to keep the post office from staying competitive and limber and keeping with the times because they have special interests at stake. It's utterly annoying of them.

"arrogated monopolies to itself..." It in no way bars the competition from operating. The only stated monopoly is the federal monopoly on govt mail services (IE states can't run a mail service)

So what's your deal with making the USPS your whipping boy anyways? It doesn't cost you any money other than postage, so why should you care? Obviously, if the USPS is overall self sufficient, then something is being done right - and it's at a cost much less than the alternatives. If the other services were hands down better, they would bigger than it
that_guy
not rated yet May 13, 2011
So I don't see how you're "arguing circles around me"

It doesn't cost me money (other than postage) and it provides a benefit...and a BIG cost benefit to us as consumers, yet does not interfere with other similar services (Other than being the competition)

I really don't know why someone would bother complaining. and the post office is rather tertiary to the debate in the first place because it is not tax funded.

as to that argument - police departments are tax funded. It costs less to have a big department that covers 50k people over several square miles than it costs to cover 500 people over 500 square miles.

Also, park rangers are almost always in rural areas, because national parks and reserves tend to be in rural areas.

The obvious point is that in any democracy, a rural area will get more tax dollars per capita because all land has some value to the democracy as a whole, and in cities there are more people per unit of land which is more efficient to administer
jscroft
1 / 5 (1) May 13, 2011
reddogreport.com/2011/02/obama-budget-includes-11-billion-post-office-bailout/

The headline? "Obama Budget Includes $11 Billion Post Office Bailout"

If you don't think that costs you money, it can only be because (a) you don't pay taxes, or (b) you aren't thinking very hard.

Either way, you should probably spend a little time pondering the distinction between "cost" and "price" before you choke on your own shoe leather.
COCO
1 / 5 (1) May 13, 2011
I think the point here is how much can we afford to subsidize the rural population with their sedentary life style and their lack of real initative? It may be time to ask them to pull their own - and considerable weight.
that_guy
not rated yet May 13, 2011
@js - Obama may want to bail out the post office right now, because as i said, it is losing money at the moment, but, it hasn't cost us anything yet, so my point is still true.

Also, the causes of the post offices problems are readily clear and easily mollified without the bailout or extra government intervention. like raise postage by a few cents. paying 50 cents a letter for a profitible post office sure beats paying $7 dollars every freaking time. How. Do. You. Not. Get. This?

With all the benefits of the post office, why would you strike it down in the face of severe consequences. Your rationale is like saying that all cars are bad because you got a flat tire. No, you fix it and then you can keep driving.

Obviously there is no reason to continue this dialogue. You have such a narrow minded view that you cannot even acknowledge obvious facts that even might contradict your view. You are not open minded, and your one piece of evidence is not close to convincing me.
that_guy
not rated yet May 13, 2011
I think the point here is how much can we afford to subsidize the rural population with their sedentary life style and their lack of real initative? It may be time to ask them to pull their own - and considerable weight.


LOL. at least it's on topic, even if it is a troll comment.
ennui27
not rated yet May 15, 2011
"The bottom line is, if federations wish to govern democratically, they should take a closer look at the data in studies such as this, before parceling out funds."

I am not sure of this in terms of passing out funds .. but what about the collection of funds .... Canada is rich in natural resources (metals, oil, farm land) but they are all in rural areas. Building a road, according to these people is visiting upon a lesser populated section a benefit that they seem to claim is undeserved - and undemocratic.

Diefenbaker even had a program called "Roads to Resources" that benefited the resource companies - headquarter in cities.

Brazil, according to the study, spends $$ on undeveloped areas. I would say not out of the goodness of their Brazilian hearts, but because it will enrich the large population cities.