Are local governments governed by forward looking decision makers? An investigation of spending patterns in Swedish municipalities
Article Abstract:
A study determined the extent of intertemporal behavior in local government consumption on nondurable goods and services in Sweden. Unlike an earlier study by Holtz-Eakin et al (1994), which employed aggregate data, this current investigation focused on a panel of local governments. Findings revealed that rational, future-oriented decisionmakers control at least 90% of consumption, which diverges from the result found by Holtz-Eakin and therefore contradicts the Friedman perspective. Moreover, the municipalities display homogeneous intertemporal consumption behavior, with the level of their intertemporal behavior having been quite stable in the 1980s. Results also confirmed that local governments were behaving less intertemporally in the 1970s when compared to their actions in the 1980s. Finally, the extent to which municipalities display intertemporal behavior is somewhat greater in the panel than in the aggregate studies.
Publication Name: Journal of Urban Economics
Subject: Government
ISSN: 0094-1190
Year: 1998
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Slow adjustment and the level of government spending
Article Abstract:
A situation where the steady-state public service is unambiguously greater than the first-best level is examined. In this scenario, a distortionary tax raises the marginal cost of funds and the marginal benefit of government expenditure. If the government cannot commit, the impact on the degree of government spending is affected by the rate at which the tax base reacts to a tax rate change. More specifically, a very slow tax base adjustment leads to the first-best level, which is in contradiction to the argument forwarded by Pigou (1928). The outcome is a marginal cost of funds that is approximately unity and a public service that outperforms the first-best level. Implications are discussed.
Publication Name: Journal of Urban Economics
Subject: Government
ISSN: 0094-1190
Year: 1997
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Estimating a public school expenditure model under binding spending limitations
Article Abstract:
A public school expenditure model using a sample from the New Jersey school districts is developed to assess the suitability of the Tobit estimation technique when cost parameters are restraining. The uniformity of the prelimitation and postlimitation structures is tested for, and results indicate significant similarity. The results shed light on the ineffectiveness of current school finance laws in decreasing spending disparities at the lesser end of the distribution. Expenditure limits by themselves will not gain equalization goals.
Publication Name: Journal of Urban Economics
Subject: Government
ISSN: 0094-1190
Year: 1986
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