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Fiscal and Spending Behavior of Local Governments: Identification of Price Effects When Prices Are Not Observed

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  • Aaberge, Rolf
  • Langorgen, Audun

Abstract

This paper analyzes local public fiscal and spending behavior in a setting where local governments, represented by the dominant party or coalition, are treated as utility maximizing agents. The econometric analysis, which is based on a modified version of ELES, recognizes total spending as well as total income as endogenous variables. Identification of the price effects is achieved by utilizing data on environmental cost factors and local tastes. The performance of the estimated model is investigated by testing its ability to make out-of-sample predictions of local government behavior. Copyright 2003 by Kluwer Academic Publishers

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  • Aaberge, Rolf & Langorgen, Audun, 2003. "Fiscal and Spending Behavior of Local Governments: Identification of Price Effects When Prices Are Not Observed," Public Choice, Springer, vol. 117(1-2), pages 125-161, October.
    • Handle: RePEc:kap:pubcho:v:117:y:2003:i:1-2:p:125-61
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    Citations

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    Cited by:

    1. Marie-Estelle Binet, 2013. "The Linear Expenditure System and the Demand for Municipal Public Services: The Median Voter Specification Revisited," Urban Studies, Urban Studies Journal Limited, vol. 50(9), pages 1689-1703, July.
    2. Hægeland, Torbjørn & Raaum, Oddbjørn & Salvanes, Kjell G., 2012. "Pennies from heaven? Using exogenous tax variation to identify effects of school resources on pupil achievement," Economics of Education Review, Elsevier, vol. 31(5), pages 601-614.
    3. Lars Håkonsen & Trond Erik Lunder, 2015. "Matching versus General Grants: Local Government Response to Child-Care Subsidies," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 71(3), pages 299-327, September.
    4. Audun Langørgen, 2015. "A structural approach for analyzing fiscal equalization," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(3), pages 376-400, June.
    5. Øien Henning, 2013. "Do Local Governments Respond to (Perverse) Financial Incentives in Long-Term Care Funding Schemes?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(2), pages 525-549, August.
    6. Lars Håkonsen & Knut Løyland, 2016. "Local government allocation of cultural services," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 40(4), pages 487-528, November.
    7. Aaberge, Rolf & Eika, Lasse & Langørgen, Audun & Mogstad, Magne, 2019. "Local governments, in-kind transfers, and economic inequality," Journal of Public Economics, Elsevier, vol. 180(C).
    8. Marie-Estelle Binet, 2011. "Reconsidering the Demand for Municipal Public Goods Specification : Evidence from French Municipalities," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201120, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    9. Roman Matkovskyy, 2020. "A measurement of affluence and poverty interdependence across countries: Evidence from the application of tail copula," Bulletin of Economic Research, Wiley Blackwell, vol. 72(4), pages 404-416, October.
    10. Richard J. Cebula & Joshua C. Hall & Maria Y. Tackett, 2017. "Non-public competition and public school performance: evidence from West Virginia," Applied Economics, Taylor & Francis Journals, vol. 49(12), pages 1185-1193, March.
    11. Israel Garcia & Bernd Hayo, 2022. "The Influence of Politicians’ Sex on Political Budget Cycles: An Empirical Analysis of Spanish Municipalities," MAGKS Papers on Economics 202223, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    12. Rolf Aaberge & Audun Langørgen, 2006. "Measuring The Benefits From Public Services: The Effects Of Local Government Spending On The Distribution Of Income In Norway," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 52(1), pages 61-83, March.
    13. Witterblad, Mikael, 2008. "Essays on Redistribution and Local Public Expenditures," Umeå Economic Studies 731, Umeå University, Department of Economics.
    14. Aaberge, Rolf & Bhuller, Manudeep & Langørgen, Audun & Mogstad, Magne, 2010. "The distributional impact of public services when needs differ," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 549-562, October.
    15. Audun Langørgen, 2011. "Targeting public services through the unequal treatment of unequals," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(2), pages 193-213, April.
    16. Audun Langørgen & Dag Rønningen, 2004. "Local government preferences, individual needs, and the allocation of social assistance," Discussion Papers 380, Statistics Norway, Research Department.
    17. Janina Kotlinska & Joanna Nucinska & Jacek Bednarz, 2021. "Education Financing: Explaining the Expenditure Concentration Gap between the State and Local Governments in Poland 2008-2019," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 564-578.
    18. Witterblad, Mikael, 2008. "The Demand for Local Public Services in Sweden," Umeå Economic Studies 730, Umeå University, Department of Economics.
    19. Héctor Cardozo, 2021. "An estimation of expenditure needs for Argentinian provinces: A structural modeling approach," Ensayos de Política Económica, Departamento de Investigación Francisco Valsecchi, Facultad de Ciencias Económicas, Pontificia Universidad Católica Argentina., vol. 3(3), pages 41-75, Octubre.

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