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Are Local Governments Governed by Forward Looking Decision Makers?

Author

Listed:
  • Dahlberg, Matz

    () (Department of Economics)

  • Lindström , Tomas

    (Riksbanken)

Abstract

In this paper we investigate the extent to which local government consumption in Sweden is determined by permanent rather than current resources. Evidence from a panel of municipalities indicates that most consumption (90-95 percent) is associated with permanent resources. That is, spending decisions on non-durable goods and services in Swedish municipalities are to a very high degree determined by rational, forward looking decision makers. This result contrasts sharply with the common view that local governments do not act intertemporally. One policy implication is that it might be difficult for the central government to conduct stabilization policy by influencing the municipalities' current resources.

Suggested Citation

  • Dahlberg, Matz & Lindström , Tomas, 1996. "Are Local Governments Governed by Forward Looking Decision Makers?," Working Paper Series 1996:20, Uppsala University, Department of Economics.
  • Handle: RePEc:hhs:uunewp:1996_020
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    Citations

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    Cited by:

    1. Borge, Lars-Erik & Dahlberg, Matz & Tovmo, Per, 2001. "The Intertemporal Spending Behavior of Local Governments: A Comparative Analysis of the Scandinavian Countries," Working Paper Series 2001:10, Uppsala University, Department of Economics.
    2. Moisio, Antti, 2002. "Essays on Finnish Municipal Finance and Intergovernmental Grants," Research Reports 93, VATT Institute for Economic Research.
    3. Lars-Erik Borge & Per Tovmo, 2009. "Myopic or Constrained by Balanced-Budget Rules? The Intertemporal Spending Behavior of Norwegian Local Governments," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(2), pages 200-219, June.
    4. Abdul Jalil, Ahmad Zafarullah & Abdul Karim, Noor Al-Huda, 2008. "Constraining the spending behavior of subnational governments through borrowing limitation: The case of Malaysia," MPRA Paper 25234, University Library of Munich, Germany.
    5. Sorensen, Bent E. & Yosha, Oved, 1998. "International risk sharing and European monetary unification," Journal of International Economics, Elsevier, vol. 45(2), pages 211-238, August.
    6. Antti Moisio, 2001. "On Local Government Spending and Taxation Behaviour - Effect of population size and economic condition," ERSA conference papers ersa01p170, European Regional Science Association.
    7. 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.
    8. Aronsson, Thomas, 2004. "Social Accounting and the Public Sector," Umeå Economic Studies 644, Umeå University, Department of Economics.

    More about this item

    Keywords

    Local government consumption; Intertemporal decision making;

    JEL classification:

    • D99 - Microeconomics - - Micro-Based Behavioral Economics - - - Other
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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