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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)

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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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Publisher 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

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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
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Web page: http://www.nek.uu.se/
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Related research
Keywords: Local government consumption; Intertemporal decision making;

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Find related papers by JEL classification:
D99 - Microeconomics - - Intertemporal Choice and Growth - - - Other
H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

Cited by:
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  1. Antti Moisio, 2002. "Essays on Finnish Municipal Finance and Intergovernmental Grants," Research Reports 93, Government Institute for Economic Research Finland (VATT). [Downloadable!]
  2. Matz Dahlberg & Eva Johansson, 2000. "An examination of the dynamic behaviour of local governments using GMM bootstrapping methods," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(4), pages 401-416. [Downloadable!]
    Other versions:
  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. [Downloadable!]
    Other versions:
  4. 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!]
  5. Borge, Lars-Erik & Dahlberg, Matz & Tovmo, Per, 2001. "The Intertemporal Spending Behavior of Local Governments: A Comparative Analysis of the Scandinavian Countries," Working Paper Series 2001:10, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  6. Aronsson, Thomas, 2004. "Social Accounting and the Public Sector," UmeÃ¥ Economic Studies 644, Umeå University, Department of Economics. [Downloadable!]
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