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Are Local Governments Governed by Forward Looking Decision Makers?

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Author Info

  • Dahlberg, Matz

    ()
    (Department of Economics)

  • Lindström , Tomas

    (Riksbanken)

Abstract

In this paper we investigate the extent to which local government consumption in Sweden is determined by permanent rather than current resources. Evidence from a panel of municipalities indicates that most consumption (90-95 percent) is associated with permanent resources. That is, spending decisions on non-durable goods and services in Swedish municipalities are to a very high degree determined by rational, forward looking decision makers. This result contrasts sharply with the common view that local governments do not act intertemporally. One policy implication is that it might be difficult for the central government to conduct stabilization policy by influencing the municipalities' current resources.

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Bibliographic Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 1996:20.

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Length: 29 pages
Date of creation: 23 Sep 1996
Date of revision:
Publication status: Published in Journal of Urban Economics, 1998, pages 254-271.
Handle: RePEc:hhs:uunewp:1996_020

Contact details of provider:
Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Email:
Web page: http://www.nek.uu.se/
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Related research

Keywords: Local government consumption; Intertemporal decision making;

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Cited by:
  1. Dahlberg, Matz & Johansson, Eva, 1997. "An Examination of the Dynamic Behavior of Local Governments Using GMM Bootstrapping Methods," Working Paper Series 1997:11, Uppsala University, Department of Economics.
  2. 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).
  3. Lars-Erik Borge & Per Tovmo, 2007. "Myopic or constrained by balanced-budget-rules? The intertemporal spending behavior of Norwegian local governments," Working Paper Series 8807, Department of Economics, Norwegian University of Science and Technology.
  4. Antti Moisio, 2002. "Essays on Finnish Municipal Finance and Intergovernmental Grants," Research Reports 93, Government Institute for Economic Research Finland (VATT).
  5. Sorensen, B-E & Yosha, O, 1996. "International Risk Sharing and European Monetary Unification," Papers 40-96, Tel Aviv.
  6. Borge, L.E. & Dahleberg, M. & Tovmo, P., 2001. "The Intertemporal Spending Behavior of Local Governments : A Comparative Analysis of the Scandinavian Countries," Papers 2001:10, Uppsala - Working Paper Series.
  7. Abdul Jalil, Ahmad Zafarullah & Abdul Karim, Noor Al-Huda, 2008. "Constraining the spending behavior of subnational governments through borrowing limitation: The case of Malaysia," MPRA Paper 25234, University Library of Munich, Germany.
  8. Aronsson, Thomas, 2004. "Social Accounting and the Public Sector," UmeÃ¥ Economic Studies 644, Umeå University, Department of Economics.

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