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Spend and Tax or Tax and Spend? Panel Data Evidence from Finnish Municipalities during 1985 - 1999

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  • Moisio, Antti

Abstract

This paper studies the dynamic interrelationship between total expenditures, own source revenues, grants received from state and loans in Finnish municipalities. Two separate panel data sets that cover the years 1985-1992 for matching grants period and 1993-1999 for formula based grant period are used for all municipalities. The analysis is done using the VAR method for panel data. I find, first, that there are important dynamic interrelationships between the variables in question. Second, I find that during the matching grants period, expenditures Granger-cause revenues uni-directionally, whereas during the formula based grants system the revenues and expenditures Granger-cause each other. The grants Granger-cause expenditures during both periods. In the end of the 1990s municipalities have been able to pay off their loans primarily by cutting expenditures and not by increasing own source revenues.

Suggested Citation

  • Moisio, Antti, 2000. "Spend and Tax or Tax and Spend? Panel Data Evidence from Finnish Municipalities during 1985 - 1999," Discussion Papers 242, VATT Institute for Economic Research.
    • Handle: RePEc:fer:dpaper:242
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    File URL: https://www.doria.fi/handle/10024/148141
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    Cited by:

    1. Miriam Hortas-Rico, 2014. "Urban sprawl and municipal budgets in Spain: A dynamic panel data analysis," Papers in Regional Science, Wiley Blackwell, vol. 93(4), pages 843-864, November.
    2. Arcade NDORICIMPA, 2017. "Analysis of Asymmetries in the Tax-Spending Nexus in Burundi," Journal of Economics and Political Economy, KSP Journals, vol. 4(1), pages 53-70, March.
    3. Antti Moisio, 2001. "On Local Government Spending and Taxation Behaviour - effect of population size and economic condition," Discussion Papers 257, Government Institute for Economic Research Finland (VATT).

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