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The Demand for Local Public Services in Sweden

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  • Witterblad, Mikael

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    (Department of Economics, Umeå University)

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    Abstract

    This paper analyzes the composition of municipal expenditures in Sweden by estimating a demand system for local public services, in which tax revenue collection is treated as endogenous. The estimation is based on the QAIDS specification. The empirical application uses panel data for the period 1998-2005 and for six local public services. The results show that the point estimates of all income elasticities except one are positive, and that none of them significantly exceeds one. Furthermore, the point estimates of the own-price elasticities are negative and less than one in absolute value for all services.

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    File URL: http://www.econ.umu.se/DownloadAsset.action?contentId=48006&languageId=3&assetKey=ues730
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    Bibliographic Info

    Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 730.

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    Length: 42 pages
    Date of creation: 10 Mar 2008
    Date of revision:
    Handle: RePEc:hhs:umnees:0730

    Contact details of provider:
    Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
    Phone: 090 - 786 61 42
    Fax: 090 - 77 23 02
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    Web page: http://www.econ.umu.se/
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    Keywords: Demand system; local public finance; local government spending;

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    1. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002. "Instrumental variables and GMM: Estimation and testing," North American Stata Users' Group Meetings 2003, Stata Users Group 05, Stata Users Group.
    2. Blundell, Richard & Pashardes, Panos & Weber, Guglielmo, 1993. "What Do We Learn About Consumer Demand Patterns from Micro Data?," American Economic Review, American Economic Association, American Economic Association, vol. 83(3), pages 570-97, June.
    3. Dunne, John Paul & Pashardes, Panos & Smith, Ronald P, 1984. "Needs, Costs and Bureaucracy: The Allocation of Public Consumption in the UK," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 94(373), pages 1-15, March.
    4. Aronsson, Thomas & Palme, Mårten, 1994. "A Decade of Tax and Benefit Reforms in Sweden - Effects on Labour Supply, Welfare and Inequality," Working Paper Series in Economics and Finance 18, Stockholm School of Economics.
    5. Ehrenberg, Ronald G, 1973. "The Demand for State and Local Government Employees," American Economic Review, American Economic Association, American Economic Association, vol. 63(3), pages 366-79, June.
    6. Borge, Lars-Erik & Rattso, Jorn, 1995. "Demographic shift, relative costs and the allocation of local public consumption in Norway," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 25(6), pages 705-726, December.
    7. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, American Economic Association, vol. 70(3), pages 312-26, June.
    8. Deacon, Robert T, 1978. "A Demand Model for the Local Public Sector," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 184-92, May.
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    10. Witterblad, Mikael, 2007. "Income Heterogeneity and the Flypaper Effect," UmeÃ¥ Economic Studies, UmeÃ¥ University, Department of Economics 718, Umeå University, Department of Economics.
    11. Aronsson, Thomas & Wikstrom, Magnus, 1996. "Local public expenditure in Sweden a model where the median voter is not necessarily decisive," European Economic Review, Elsevier, Elsevier, vol. 40(9), pages 1705-1716, December.
    12. Aaberge, Rolf & Langorgen, Audun, 2003. " Fiscal and Spending Behavior of Local Governments: Identification of Price Effects When Prices Are Not Observed," Public Choice, Springer, Springer, vol. 117(1-2), pages 125-61, October.
    13. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
    14. Toshinobu Matsuda, 2006. "Linear approximations to the quadratic almost ideal demand system," Empirical Economics, Springer, Springer, vol. 31(3), pages 663-675, September.
    15. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
    16. Borcherding, Thomas E & Deacon, Robert T, 1972. "The Demand for the Services of Non-Federal Governments," American Economic Review, American Economic Association, American Economic Association, vol. 62(5), pages 891-901, December.
    17. Dunne, J. P. & Smith, R. P., 1983. "The allocative efficiency of government expenditure: Some comparative tests," European Economic Review, Elsevier, Elsevier, vol. 20(1-3), pages 381-394, January.
    18. Bergstrom, Theodore C & Goodman, Robert P, 1973. "Private Demands for Public Goods," American Economic Review, American Economic Association, American Economic Association, vol. 63(3), pages 280-96, June.
    19. Moschini, GianCarlo, 1995. "Units of Measurement and the 'Stone Index' In Demand System Estimation," Staff General Research Papers, Iowa State University, Department of Economics 5058, Iowa State University, Department of Economics.
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