An Examination of the Dynamic Behavior of Local Governments Using GMM Bootstrapping Methods
AbstractRecent Monte Carlo evidence has shown that tests based on asymptotic critical values tend to reject a true null too often, while tests based on bootstrap critical values have empirical sizes that are very close to the nominal ones. This casts doubt on the growing number of studies indicating considerable dynamics in local government behavior since they all rely on asymptotic critical values. Using GMM bootstrapping techniques, this paper re-investigates the dynamic interrelationship between local government revenues and expenditures. Further, the results are compared with those obtained using asymptotical critical values. The panel covers 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 behavior in the local public sector.
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Bibliographic InfoPaper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 1997:11.
Length: 20 pages
Date of creation: 07 Apr 1997
Date of revision:
Publication status: Published in Journal of Applied Econometrics, 2000, pages 401-416.
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
Web page: http://www.nek.uu.se/
More information through EDIRC
GMM bootstrapping; local governments; revenues-expenditures nexus;
Other versions of this item:
- 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.
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
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