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An examination of the dynamic behaviour of local governments using GMM bootstrapping methods

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Author Info
Matz Dahlberg (Department of Economics, Uppsala University, Box 513, SE-751 20 Uppsala, Sweden)
Eva Johansson (Department of Economics, Uppsala University, Box 513, SE-751 20 Uppsala, Sweden)

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Abstract

Even though recent Monte Carlo evidence has shown that the use of bootstrap critical values, instead of asymptotic ones, improves the size of the tests substantially, empirical applications using GMM bootstrap techniques are largely missing. In this paper, the dynamic relationship between local government revenues and expenditures is re-investigated using GMM bootstrapping techniques on a panel of 265 Swedish municipalities over the period 1979-1987. A lag of one year is found in the expenditures equation, while no dynamics is found in the own-source revenues and grants equations. These results, while contrasting sharply with those obtained when asymptotic critical values are used, are well in line with the theoretical explanations given in the literature for dynamic behaviour in the local public sector. Copyright © 2000 John Wiley & Sons, Ltd.

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File URL: http://qed.econ.queensu.ca:80/jae/2000-v15.4/
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 15 (2000)
Issue (Month): 4 ()
Pages: 401-416
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:jae:japmet:v:15:y:2000:i:4:p:401-416

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
  2. Dahlberg, Matz & Johansson, Eva, 1998. "The Revenues-Expenditures Nexus: Panel Data Evidence from Swedish Municipalities," Applied Economics, Taylor and Francis Journals, vol. 30(10), pages 1379-86, October. [Downloadable!] (restricted)
  3. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October. [Downloadable!] (restricted)
  4. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
  5. Joel L. Horowitz, 1996. "Bootstrap Methods in Econometrics: Theory and Numerical Performance," Econometrics 9602009, EconWPA, revised 05 Mar 1996. [Downloadable!]
  6. Bergström, Pål & Dahlberg, Matz & Johansson, Eva, 1997. "GMM Bootstrapping and Testing in Dynamic Panels," Working Paper Series 1997:10, Uppsala University, Department of Economics.
  7. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July. [Downloadable!] (restricted)
  8. Hall, Peter & Horowitz, Joel L, 1996. "Bootstrap Critical Values for Tests Based on Generalized-Method-of-Moments Estimators," Econometrica, Econometric Society, vol. 64(4), pages 891-916, July. [Downloadable!] (restricted)
  9. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November. [Downloadable!] (restricted)
  10. Russell Davidson & James G. MacKinnon, 1996. "The Size Distortion of Bootstrap Tests," Working Papers 936, Queen's University, Department of Economics. [Downloadable!]
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  11. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1989. "The Revenues-Expenditures Nexus: Evidence from Local Government Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 415-29, May. [Downloadable!] (restricted)
    Other versions:
  12. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November. [Downloadable!] (restricted)
  13. Rubinfeld, Daniel L., 1987. "The economics of the local public sector," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 11, pages 571-645 Elsevier. [Downloadable!] (restricted)
  14. Dahlberg, Matz & Lindström , Tomas, 1996. "Are Local Governments Governed by Forward Looking Decision Makers?," Working Paper Series 1996:20, Uppsala University, Department of Economics.
  15. Anderson, T. W. & Hsiao, Cheng., 1980. "Estimation of Dynamic Models with Error Components," Working Papers 336, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Antti Moisio, 2002. "Essays on Finnish Municipal Finance and Intergovernmental Grants," Research Reports 93, Government Institute for Economic Research Finland (VATT). [Downloadable!]
  2. Antti Moisio, 2001. "On Local Government Spending and Taxation Behaviour - Effect of population size and economic condition," ERSA conference papers ersa01p170, European Regional Science Association. [Downloadable!]
  3. Constantino Cronemberger Mendes & Maria da Conceição Sampaio de Sousa, 2006. "Demand for locally provided public services within the median voter's framework: the case of the Brazilian municipalities," Applied Economics, Taylor and Francis Journals, vol. 38(3), pages 239-251, February. [Downloadable!] (restricted)
  4. Dahlberg, Matz & Mörk, Eva, 2005. "Public Employment and the Double Role of Bureaucrats," Working Paper Series 2005:3, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  5. Navon, Guy, 2006. "Budgetary Dynamics in The Local Authorities in Israel," MPRA Paper 9707, University Library of Munich, Germany. [Downloadable!]
  6. Bergström, Pål & Dahlberg, Matz & Johansson, Eva, 1998. "Municipal labour demand," Working Paper Series 1998:1, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
  7. Dahlberg, Matz & Mörk, Eva & Rattso, Jorn & Ågren, Hanna, 2006. "Using a discontinuous grant rule to identify the effect of grants on local taxes and spending," Working Paper Series 2006:25, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  8. Griet Malengier & Lorenzo Pozzi, 2005. "Examining Ricardian Equivalence by estimating and bootstrapping a nonlinear dynamic panel model," Money Macro and Finance (MMF) Research Group Conference 2005 61, Money Macro and Finance Research Group. [Downloadable!]
  9. Bergström, Pål, 1999. "Bootstrap Methods and Applications in Econometrics - A Brief Survey," Working Paper Series 1999:2, Uppsala University, Department of Economics. [Downloadable!]
  10. G. Malengier & L. Pozzi, 2004. "Examining Ricardian Equivalence by estimating and bootstrapping a nonlinear dynamic panel model," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/274, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
  11. Constantino Cronemberger Mendes & Maria da Conceição Sampaio de Sousa, 2004. "Demand For Locally Provided Public Services Within The Median Voter'S Framework: The Case Of The Brazilian Municipalities," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting] 027, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
  12. Dahlberg, Matz & Mörk, Eva, 2008. "Is there an election cycle in public employment? Separating time effects from election year effects," Working Paper Series 2008:3, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
    Other versions:
  13. Dahlberg, Matz & Jacob, Johanna, 2000. "Sluggishness, Endogeneity and the Demand for Local Public Services," Working Paper Series 2000:17, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  14. Bergström, Pål & Dahlberg, Matz & Johansson, Eva, 1998. "Municipal Labour Demand - Sweden 1988 - 1995," Working Paper Series 1998:24, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  15. Edmark, Karin, 2007. "Strategic Competition in Swedish Local Spending on Childcare, Schooling and Care for the Elderly," Working Paper Series 2007:21, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  16. Antti Moisio, 2001. "On Local Government Spending and Taxation Behaviour - effect of population size and economic condition," Discussion Papers 257, Government Institute for Economic Research Finland (VATT). [Downloadable!]
  17. Dahlberg, Matz & Forslund, Anders, 1999. "Direct displacement effects of labour market programmes: the case of Sweden," Working Paper Series 1999:7, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
    Other versions:
  18. Albert Sole-Olle & Pilar Sorribas-Navarro, 2009. "The dynamic adjustment of local government budgets: Does Spain Behave differently?," Working Papers in Economics 226, Universitat de Barcelona. Espai de Recerca en Economia. [Downloadable!]
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