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Neighborhood effects in social service provision. Competition or reflection?

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Abstract

Expenditures by local goverments often exhibit positive spatial autocorrelation. A spatial pattern might arise either from an endogenous effect (with local authorities being affected by the average behavior in the neighborhood) or from exogenous/correlated effects(with the behavior of close-by authorities simply reflecting common neighborhood characteristics or correlated shocks).In order to identify the underlying spatial process, this paper models the determination of local expenditure on social services within a spatial framework that allows interdependent local authority behavior and spatially auto-correlated shocks, and performs an empirical analysis on a cross-section of UK local goverments. The IV (instrumental variables)and ML (maximum likelihood) estimates of a SAR (spatial auto-regressive) model, as well asthe ML estimates of SARMA (spatial auto-regressive moving average) model suggest that the most likely source of spatial auto-correlation in social spending is endogenous mimicking among neighboring localities.

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Paper provided by University of Turin in its series Department of Economics and Statistics Cognetti de Martiis. Working Papers with number 200206.

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Length: 27 pages
Date of creation: Dec 2002
Date of revision:
Handle: RePEc:uto:dipeco:200206

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Cited by:
  1. Lenka Šťastná, 2009. "Spatial Interdependence of Local Public Expenditures: Selected Evidence from the Czech Republic," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(1), pages 007-025, March.

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