Determinants of Expenditure Variation in Finnish Municipalities
AbstractThis paper focuses on two separate issues. First, the expenditure response of Finnish municipalities to price and income changes during the matching grants period is examined. Second, the existence of the so-called "flypaper effect" under the formula-based grant period is tested. Two panel data sets are used: the last eight years (1985-1992) of the matching grants period and the first seven years (1993-1999) of the formula-based period. Seven expenditure categories are analysed. The results suggest that positive price elasticity parameters existed for education expenditures under the matching grants system. For the social welfare and health care sector, price elasticity was negative. One reason for positive price effects may have been the closed-ended grants in the education sector. For the formula-based grants period, the results lend support to the "flypaper effect" because the estimated grant parameters were larger than the income parameters for most of the expenditure categories studied.
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Bibliographic InfoPaper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 269.
Date of creation: 19 Mar 2002
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Find related papers by JEL classification:
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- I00 - Health, Education, and Welfare - - General - - - General
- R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
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