Umeå Economic Studies,
Umeå University, Department of Economics

Abstract: This paper studies the effects of local public policy on the distribution of pre-tax income from employment in the Swedish municipalities by estimating an income shares model. Three categories of local public spending are recognized; social expenditures, primary and secondary education expenditures and recreational expenditures. It is found that social expenditures affect the within-municipality distribution of income, whereas no effects can be found for education and recreation. For social expenditures, the effect is to concentrate a larger portion of total income among the middle income groups, and to decrease the portion of total income from high income earners and low income earners. This evidence is consistent with the view that local public expenditures may affect the composition of the local population.

Keywords: Income distribution; Local public expenditures

JEL-codes: D33; H72

15 pages, September 30, 1999

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