IDEAS home Printed from https://ideas.repec.org/a/pio/envirc/v28y2010i1p54-71.html
   My bibliography  Save this article

Choosing between service fees and budget funding to pay for local services: empirical evidence from Spain

Author

Listed:
  • Germà Bel
  • Antonio Miralles

Abstract

In this paper we investigate how local governments finance public services, and their choice between budget funding and flat service fees. On the basis of a simple model of electoral competition we predict that the tax policy will be extreme (either progressive or conservative) only if both the voting majority’s economic interests and the valence point to the same ideological side. If ideological and economic interests diverge, then the equilibrium policy will be a moderate one. From our empirical analysis we find that progressive mayors in progressive constituencies use budget funding to a greater degree, whereas conservative mayors in conservative constituencies prefer flat service fees. When the political affiliation of the mayor and the ideological bias of the constituency diverge, more moderate policies are chosen. We find also that service-specific deficits are lower in cities with private production of solid waste service. Thus policy makers may have used privatization as a means to reduce the political cost of increasing service-specific taxes.

Suggested Citation

  • Germà Bel & Antonio Miralles, 2010. "Choosing between service fees and budget funding to pay for local services: empirical evidence from Spain," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 28(1), pages 54-71, February.
  • Handle: RePEc:pio:envirc:v:28:y:2010:i:1:p:54-71
    as

    Download full text from publisher

    File URL: http://www.envplan.com/abstract.cgi?id=c08112r
    File Function: abstract
    Download Restriction: Fulltext access restricted to subscribers, see http://www.envplan.co.uk/C.html for details

    File URL: http://www.envplan.com/epc/fulltext/c28/c08112r.pdf
    File Function: main text
    Download Restriction: Fulltext access restricted to subscribers, see http://www.envplan.co.uk/C.html for details

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:cup:apsrev:v:77:y:1983:i:01:p:142-157_24 is not listed on IDEAS
    2. Bernhardt, M. Daniel & Ingerman, Daniel E., 1985. "Candidate reputations and the `incumbency effect'," Journal of Public Economics, Elsevier, vol. 27(1), pages 47-67, June.
    3. Torsten Persson & Lars E. O. Svensson, 1989. "Why a Stubborn Conservative would Run a Deficit: Policy with Time-Inconsistent Preferences," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 325-345.
    4. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
    5. Andrés Rodriguez-Pose & Richard Sandall, 2008. "From Identity to the Economy: Analysing the Evolution of the Decentralisation Discourse," Environment and Planning C, , vol. 26(1), pages 54-72, February.
    6. Dijkgraaf, E. & Gradus, R. H. J. M., 2004. "Cost savings in unit-based pricing of household waste: The case of The Netherlands," Resource and Energy Economics, Elsevier, vol. 26(4), pages 353-371, December.
    7. William Stine, 1998. "Explaining the decision to repeal an optional local tax," Applied Economics, Taylor & Francis Journals, vol. 30(3), pages 353-363.
    8. Hettich, Walter & Winer, Stanley, 1984. "A positive model of tax structure," Journal of Public Economics, Elsevier, vol. 24(1), pages 67-87, June.
    9. Bos, Dieter, 2000. "Earmarked taxation: welfare versus political support," Journal of Public Economics, Elsevier, vol. 75(3), pages 439-462, March.
    10. de Haan, Jakob & Sturm, Jan-Egbert, 1997. "Political and economic determinants of OECD budget deficits and government expenditures: A reinvestigation," European Journal of Political Economy, Elsevier, vol. 13(4), pages 739-750, December.
    11. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Oxford University Press, vol. 55(1), pages 1-16.
    12. Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," American Economic Review, American Economic Association, vol. 80(1), pages 37-49, March.
    13. Cukierman, Alex, 1991. "Asymmetric Information and the Electoral Momentum of Public Opinion Polls," Public Choice, Springer, vol. 70(2), pages 181-213, May.
    14. J. Biegeleisen & David Sjoquist, 1988. "Rational voting applied to choice of taxes," Public Choice, Springer, vol. 57(1), pages 39-47, April.
    15. Anesi, Vincent, 2006. "Earmarked taxation and political competition," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 679-701, May.
    16. Avinash Dixit & John Londregan, 1998. "Ideology, Tactics, and Efficiency in Redistributive Politics," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 497-529.
    17. Santiago Lago-Peñas, 2005. "Evolving Federations and Regional Public Deficits: Testing the Bailout Hypothesis in the Spanish Case," Environment and Planning C, , vol. 23(3), pages 437-453, June.
    18. Hettich, Walter & Winer, Stanley L, 1988. "Economic and Political Foundations of Tax Structure," American Economic Review, American Economic Association, vol. 78(4), pages 701-712, September.
    19. Ansolabehere, Stephen & Snyder, James M, Jr, 2000. "Valence Politics and Equilibrium in Spatial Election Models," Public Choice, Springer, vol. 103(3-4), pages 327-336, June.
    20. Galli, Emma & Padovano, Fabio, 2002. "A Comparative Test of Alternative Theories of the Determinants of Italian Public Deficits (1950-1998)," Public Choice, Springer, vol. 113(1-2), pages 37-58, October.
    21. Paul R. Blackley & Larry DeBoer, 1987. "Tax Base Choice by Local Governments," Land Economics, University of Wisconsin Press, vol. 63(3), pages 227-236.
    22. Richard M Bird & Enid Slack, 2007. "An Approach to Metropolitan Governance and Finance," Environment and Planning C, , vol. 25(5), pages 729-755, October.
    23. Carbonell-Nicolau, Oriol & Ok, Efe A., 2007. "Voting over income taxation," Journal of Economic Theory, Elsevier, vol. 134(1), pages 249-286, May.
    24. Gill, H. Leroy & Haurin, Donald R., 2001. "The choice of tax base by local authorities: voter preferences, special interest groups, and tax base diversification," Regional Science and Urban Economics, Elsevier, vol. 31(6), pages 733-749, November.
    25. Ignacio Ortuño Orti´n, 2002. "Ideological versus Downsian political competition," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 19(3), pages 551-567.
    26. Roberto Ricciuti, 2004. "Political Fragmentation and Fiscal Outcomes," Public Choice, Springer, vol. 118(3_4), pages 365-388, March.
    27. Edin, Per-Anders & Ohlsson, Henry, 1991. "Political determinants of budget deficits: Coalition effects versus minority effects," European Economic Review, Elsevier, vol. 35(8), pages 1597-1603, December.
    28. Alesina, Alberto, 1988. "Credibility and Policy Convergence in a Two-Party System with Rational Voters," American Economic Review, American Economic Association, vol. 78(4), pages 796-805, September.
    29. Friedman, Daniel & Wittman, Donald, 1995. "Why voters vote for incumbents but against incumbency: A rational choice explanation," Journal of Public Economics, Elsevier, vol. 57(1), pages 67-83, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Benny Geys & Federico Revelli, 2011. "Economic and political foundations of local tax structures: an empirical investigation of the tax mix of Flemish municipalities," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 29(3), pages 410-427, June.
    2. Nuno Ferreira da Cruz & Pedro Simões & Rui Cunha Marques, 2013. "The hurdles of local governments with PPP contracts in the waste sector," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 31(2), pages 292-307, April.
    3. Santiago Lago-Peñas, 2005. "Evolving federations and regional public deficits: testing the bailout hypothesis in the Spanish case," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 23(3), pages 437-453, June.
    4. Klien, Michael, 2014. "Tariff increases over the electoral cycle: A question of size and salience," European Journal of Political Economy, Elsevier, vol. 36(C), pages 228-242.
    5. Michael Klien, 2014. "Corporatization and the Behavior of Public Firms: How Shifting Control Rights Affects Political Interference in Water Prices," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(4), pages 393-422, June.
    6. Daniel Albalate & Germà Bel & R. Richard Geddes, 2012. "“The determinants of contractual choice for private involvement in infrastructure projects in the United States”," IREA Working Papers 201220, University of Barcelona, Research Institute of Applied Economics, revised Dec 2012.
    7. Michael Klien, 2015. "The political side of public utilities: How opportunistic behaviour and yardstick competition shape water prices in Austria," Papers in Regional Science, Wiley Blackwell, vol. 94(4), pages 869-890, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pio:envirc:v:28:y:2010:i:1:p:54-71. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Neil Hammond). General contact details of provider: http://www.pion.co.uk .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.