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The Impact of Mandates and Tax Limits on Voluntary Contributions to Local Public Services: An Application to Fire Protection Services

  • Douglas C. Bice

    (Eastern New Mexico University)

  • William H. Hoyt

    (University of Kentucky)

The past twenty-five years have seen a tremendous increase in interventions by state governments into local public service provision through mandates related to employee compensation and production processes and tax and spending limitations. Reflecting this phenomena, a substantial literature has arisen examining the impact of these mandates on both spending on and the quality of public services. Here, we focus on another impact of mandates on public services, the use of volunteers and fund-raising by local governments. We develop a model of contributions to local public services, which predicts that tax limits increase both the use of volunteers and fund-raising and mandates increase the use of volunteers. These predictions are then tested using data on 1,846 fire-protection departments in twenty-eight states in 1993. Specifically, we examine how the existence of mandates and tax limits influences the type of department (volunteer; paid; or combined) as well as on the extent of fund-raising. The results of our empirical work generally support our theoretical predictions. The existence a tax limit makes it 11% more likely that a department (of mean characteristics) is volunteer and 10% more likely that it engages in fund-raising. A mandated pension increases the probability that a department is volunteer by 13% and increases the likelihood that it engages in fund-raising by approximately 7%.

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Paper provided by EconWPA in its series Public Economics with number 9704002.

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Length: 37 pages
Date of creation: 16 Apr 1997
Date of revision:
Handle: RePEc:wpa:wuwppe:9704002
Note: Type of Document - Binary Word for Windows (V.6/7) document; prepared on IBM PC Compat.; to print on HP LaserJet; pages: 37
Contact details of provider: Web page: http://128.118.178.162

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  1. Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, vol. 84(3), pages 622-41, June.
  2. William D. Duncombe, 1991. "Demand for Local Public Services Revisited: the Case of Fire Protection," Public Finance Review, , vol. 19(4), pages 412-436, October.
  3. Rhine, Sherrie L W, 1989. "The Effect of State Mandates on Student Performance," American Economic Review, American Economic Association, vol. 79(2), pages 231-35, May.
  4. Figlio, David N., 1997. "Did the "tax revolt" reduce school performance?," Journal of Public Economics, Elsevier, vol. 65(3), pages 245-269, September.
  5. Burton Abrams & William Dougan, 1986. "The effects of constitutional restraints on governmental spending," Public Choice, Springer, vol. 49(2), pages 101-116, January.
  6. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-58, December.
  7. Freeman, Richard B, 1997. "Working for Nothing: The Supply of Volunteer Labor," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages S140-66, January.
  8. Harold W. Elder, 1992. "Exploring the Tax Revolt: an Analysis of the Effects of State Tax and Expenditure Limitation Laws," Public Finance Review, , vol. 20(1), pages 47-63, January.
  9. 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.
  10. Brown, Eleanor & Lankford, Hamilton, 1992. "Gifts of money and gifts of time estimating the effects of tax prices and available time," Journal of Public Economics, Elsevier, vol. 47(3), pages 321-341, April.
  11. Brueckner, Jan K., 1981. "Congested public goods: The case of fire protection," Journal of Public Economics, Elsevier, vol. 15(1), pages 45-58, February.
  12. Kingma, Bruce Robert, 1989. "An Accurate Measurement of the Crowd-Out Effect, Income Effect, and Price Effect for Charitable Contributions," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1197-1207, October.
  13. Bergstrom, Theodore C & Goodman, Robert P, 1973. "Private Demands for Public Goods," American Economic Review, American Economic Association, vol. 63(3), pages 280-96, June.
  14. Menchik, Paul L. & Weisbrod, Burton A., 1987. "Volunteer labor supply," Journal of Public Economics, Elsevier, vol. 32(2), pages 159-183, March.
  15. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-83, May.
  16. Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, vol. 52(3), pages 285-307, October.
  17. Bogart, William T., 1991. "Observable Heterogeneity and the Demand for Local Public Spending," National Tax Journal, National Tax Association, vol. 44(2), pages 213-23, June.
  18. Poterba, James M & Rueben, Kim S, 1995. "The Effect of Property-Tax Limits on Wages and Employment in the Local Public Sector," American Economic Review, American Economic Association, vol. 85(2), pages 384-89, May.
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