Thesis (M.S. in Management)--Naval Postgraduate School, December 2008. / Thesis Advisor(s): Doyle, Richard. "December 2008." Description based on title screen as viewed on January 29, 2009. Includes bibliographical references (p. 125-135). Also available in print.

Since the first modern state-sponsored lottery was instituted in New Hampshire in 1964, lotteries have proliferated to 42 states and the District of Colombia. With little exception, research has shown that these lotteries are a highly regressive form of taxation. However, this body of research does not take into account a theoretical finding that the manner in which collected funds are earmarked impacts participation patterns. The goal of this dissertation is to test this finding empirically. In the first analysis, I use sales data from the Tennessee Education Lottery and scholarship data from the TEL Scholarship program to test this theory directly. I find that instant game sales are increasing in the number of scholarships awarded in a given county and that the implicit tax incidence is less regressive than in certain other states. Theory does not hold for Powerball sales. This may be due to a misconception that buying into a multi-state game does not directly subsidize programs in Tennessee. In the second analysis, I focus on the Texas Lottery, which began as a revenue stream for the state’s General Fund, but eventually became a dedicated revenue stream for K-12 education. I exploit this change to test for a structural break in the demand for two lottery games. Then, I extend an existing theory of lottery demand to take this structural break into account. I find that there is a structural break at the time the earmark is implemented, and that the lottery is less regressive after the earmark.

This dissertation focuses on how distributive politics influences the geographic allocation of federal grants to state and local governments. A secondary focus is the role of social trust in the growth of government. In the first essay, I test the degree to which the earmark ban of 2011 prevented legislators from directing federal competitive grants to their home congressional districts and whether earmarking distorted equality in the distribution of federal grants across demographic groups. I find that earmarking skewed the distribution of federal grants toward wealthy congressional districts and away from poor congressional districts. This is a groundbreaking finding, considering that no literature has addressed the impact of earmarking on economic inequality. In the second essay, I estimate the returns to lobbying for local governments in terms of federal earmarked grants, and I find that local governments in counties with higher levels of income per capita were more likely to engage in lobbying. I also find evidence of a causal link between lobbying and federal earmarks to local governments. Given that local governments in wealthy areas tend to have larger tax bases, which allows them to more easily fund public infrastructure projects, my findings imply that lobbying and earmarking hampered the ability of federal grant programs to promote equality in the distribution of federal funds. The third essay utilizes time series econometrics to examine the relationship between government regulation, spending, interest group activity, and social trust in government.

No description available.

Finding revenue is a challenge that faces many municipalities in the United States. As the tax base continues to decline and demand for government services increases, local governments are forced to make hard choices. Low on the list of priorities for local governments is the maintenance, and construction of infrastructure. Traditionally there have been several ways for local governments to fund long-term infrastructure projects including, federal-aid through the process of earmarking. The practice of earmarking has been around since the first congress, but hit its peak between 2003 and 2007. The earmarking process is controversial for several reasons; earmarking bypasses traditional merit procedures for distribution of federal-aid, earmarking is said to add costs to the agency awarded the funding, and earmarking has been linked to Congressional scandals and wasteful spending. In this paper I explore how an earmark, designated to local governments to fund long-term infrastructure projects, contributes to the costs of the project.