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Abstract

This paper analyzes local public fiscal and spending behavior in a setting where local governments, represented by the dominant party or coalition, are treated as utility maximizing agents. The econometric analysis, which is based on a modified version of ELES, recognizes total spending as well as total income as endogenous variables. Identification of the price effects is achieved by utilizing data on environmental cost factors and local tastes. The performance of the estimated model is investigated by testing its ability to make out-of-sample predictions of local government behavior.Keywords: Local public finance, local government spending, extended linear expenditure system. JEL classification: H71, H72, H74Acknowledgement: We would like to thank S. Blomquist, J. Dagsvik, E. Holmøy, J. Rattsø, S. Strøm, N.M. Stølen and an anonymous referee for helpful comments and A. Skoglund for word processing assistance.

Postcode Lottery or Systematic Differences in Norwegian Elder Care Provision?

“…If municipal differences are due to different sized municipal revenues, the differences are a result of national policies. This is because, in Norway, the municipal revenue is a virtually exogenous variable to the municipality (Aaberge & Langørgen, 2003;Borge & Rattsø, 1995;Monkerud & Sørensen, 2011). The calculation of the municipal revenue is based on structural features outside local government control, and central government decide local government tax rate and tax base.…”