Reconsidering the Demand for Municipal Public Goods Specification : Evidence from French Municipalities
Following Bergtrom and Goodman (1973), this paper can be integrated in the set of studies that have estimated the demand for municipal public services. The main innovation in this paper is methodological as we use a Stone Geary utility function to describe the median voter preferences. Unlike previous studies, we are able to derive the local public expenditure function in a (simplified) linear expenditure system, directly from the theoretical framework. The linear expenditure system provides an estimate of the portion of the incompressible public expenditure in each municipality. Using cross sectional municipal data from France, it is found to be 30% of the total per capita expenditure. Compared to the specification generally used in the literature, linear expenditure system shows a greater sensitivity to price and income variations and reveal a greater number of significant variables.
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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 125-61, October.
- Maarten A. Allers & J. Paul Elhorst, 2011. "A Simultaneous Equations Model Of Fiscal Policy Interactions," Journal of Regional Science, Wiley Blackwell, vol. 51(2), pages 271-291, 05.
- Borcherding, Thomas E & Deacon, Robert T, 1972. "The Demand for the Services of Non-Federal Governments," American Economic Review, American Economic Association, vol. 62(5), pages 891-901, December.
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