Advertisement

Public Choice

, Volume 117, Issue 1–2, pp 125–161 | Cite as

Fiscal and Spending Behavior of Local Governments: Identification of Price Effects when Prices are not Observed

  • Rolf Aaberge
  • Audun Langørgen
Article

Abstract

This paper analyzes local public fiscal andspending behavior in a setting where localgovernments, represented by the dominantparty or coalition, are treated as utilitymaximizing agents. The econometricanalysis, which is based on a modifiedversion of ELES, recognizes total spendingas well as total income as endogenousvariables. Identification of the priceeffects is achieved by utilizing data onenvironmental cost factors and localtastes. The performance of the estimatedmodel is investigated by testing itsability to make out-of-sample predictionsof local government behavior.

Keywords

Local Government Public Finance Total Income Cost Factor Price Effect 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Bahl, R., Johnson, M.B. and Wasylenko, M. (1980). State and local government expenditure determinants: The traditional view and a new approach. In:Bahl, R., Burkhead, J. and Jump, B. Jr., (Eds.), Public employment and state and local government finance. Cambridge, MA: Ballinger.Google Scholar
  2. Bergstrom, T.C. and Goodman, R.P. (1973). Private demands for public goods. American Economic Review 63: 280-296.Google Scholar
  3. Borcherding, T.E. and Deacon, R.T. (1972). The demand for the services of non-federal governments. American Economic Review 62: 891-901.Google Scholar
  4. Borge, L.-E. (1995). Economic and political determinants of fee income in Norwegian local governments. Public Choice 83: 353-373.Google Scholar
  5. Borge, L.-E. and Rattsø, J. (1995). Demographic shift, relative costs and the allocation of local public consumption in Norway. Regional Science and Urban Economics 25: 705-726.Google Scholar
  6. Borge, L.-E., Rattsø, J. and Sørensen, R.J. (1995). Local government service production: The politics of allocative sluggishness. Public Choice 82: 135-157.Google Scholar
  7. Bradford, D., Malt, R. and Oates, W.E. (1969). The rising cost of public services: Some evidence and reflections. National Tax Journal 37: 151-170.Google Scholar
  8. Bradford, D. and Oates, W. (1971). Towards a predictive theory of intergovernmental grants. American Economic Review 61: 440-448.Google Scholar
  9. Ehrenberg, R.G. (1973). The demand for state and local government employees. American Economic Review 63: 366-379.Google Scholar
  10. Gramlich, E.M. (1969). State and local governments and their budget constraint. International Economic Review 10: 163-182.Google Scholar
  11. Gramlich, E.M. and Galper, H. (1973). State and local fiscal behavior and federal grant policy. Brookings Papers on Economic Activity 1: 15-58.Google Scholar
  12. Hines, J.R., Jr. and Thaler, R.H. (1995). The flypaper effect. Journal of Economic Perspectives 9: 217-226.Google Scholar
  13. Howe, H. (1975). Development of the extended linear expenditure system from simple saving assumptions. European Economic Review 6: 305-310.Google Scholar
  14. Inman, R.P. (1971). Towards an econometric model of local budgeting. National Tax Association Papers and Proceedings: 699-719.Google Scholar
  15. Inman, R.P. (1979). The fiscal performance of local governments: An interpretative review. In: Mieszkowski, P. and Straszheim, M. (Eds.), Current issues in urban economics. Baltimore: The John Hopkins University Press.Google Scholar
  16. Johnson, M.B. (1979). Community income, intergovernmental grants, and local school district fiscal behavior. In: Mieszkowski, P. and Oakland, W.H. (Eds.), Fiscal federalism and grants in aid. Washington: The Urban Institute.Google Scholar
  17. Kramer, J. (1973). On a class of equilibrium conditions for majority rule. Econometrica 41: 285-297.Google Scholar
  18. Lluch, C. (1973). The extended linear expenditure system. European Economic Review 4: 21-32.Google Scholar
  19. Lluch, C., Powell, A.A. and Williams, R.A. (1977). Patterns in household demand and saving. Oxford: Oxford University Press.Google Scholar
  20. Pollak, R.A. and Wales, T.J. (1978). Estimation of complete demand systems from houshold budget data: The linear and quadratic expenditure systems. American Economic Review 68: 348-359.Google Scholar
  21. Rattsø, J. (1989). Local government allocation of labour and the grant system: An applied model analysis of local government behaviour in Norway. Environment and Planning C: Government and Policy 7: 273-284.Google Scholar
  22. Riker, W. and Ordeshook, P. (1973). An introduction to positive political theory. Englewood Cliffs, N.J.: Prentice-Hall.Google Scholar
  23. Romer, T. and Rosenthal, H. (1979). The elusive median voter. Journal of Public Economics 12: 143-170.Google Scholar
  24. Rosen, S. (1974). Hedonic prices and implicit markets: Product differentiation in pure competition. Journal of Political Economy 82: 34-55.Google Scholar
  25. Schwab, R.M. and Zampelli, E.M. (1987). Disentangling the demand function from the production function for local public services. Journal of Public Economics 33: 245-260.Google Scholar
  26. Tiebout, C. (1956). A pure theory of local expenditures. Journal of Political Economy 84: 416-424.Google Scholar
  27. Wildasin, D.E. (1986). Urban public finance. New York: Harwood Academic Publishers.Google Scholar

Copyright information

© Kluwer Academic Publishers 2003

Authors and Affiliations

  • Rolf Aaberge
    • 1
  • Audun Langørgen
    • 1
  1. 1.Research Department, Statistics NorwayOsloNorway

Personalised recommendations