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Are Local Governments Governed by Forward Looking Decision Makers?

  • Dahlberg, Matz

    ()

    (Department of Economics)

  • Lindström , Tomas

    (Riksbanken)

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.

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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 1996:20.

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Length: 29 pages
Date of creation: 23 Sep 1996
Date of revision:
Publication status: Published in Journal of Urban Economics, 1998, pages 254-271.
Handle: RePEc:hhs:uunewp:1996_020
Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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