Umeå Economic Studies, Department of Economics, Umeå University
No 798:
Spatial Interaction and Local Government Expenditures for Functionally Impaired in Sweden
Lena Birkelöf ()
Abstract: The thesis consists of an introductory part and three
self-contained papers.
Paper [I] studies the determinants of the
differences in expenditure on services for functionally impaired
individuals among municipalities in Sweden. A spatial autoregressive model
is used in order to test whether the decisions on the expenditure level in
a neighboring municipality affect the municipality’s own expenditure. The
results show of spatial interaction among neighbors, possible due to
mimicking. However, when controlling for differences among counties there
is no evidence of spatial interaction. Therefore, the positive interaction
first found can be interpreted either as a result of differences in the way
county councils diagnose individuals or due to interaction among the
neighbors in the same county.
Paper [II] takes advantage of a new
intergovernmental grant in two ways. First, the grant is used to study the
effect on municipal spending related to the grant. Second, the grant is
used to test a hypothesis of spatial interaction among municipalities due
to mimicking behavior. The data used pertains to the periods before and
after the introduction of the grant. A fixed-effects spatial lag model is
used to study the spatial interactions among municipalities. The results
show that before the grant, municipalities interact with their neighbors
when setting the expenditure level, while there is no evidence of
interaction in the second period. This would support the hypothesis that
the grants provide information to the municipalities and the need for
mimicking diminishes with the grant.
Paper [III] examines whether local
public expenditures on services to functionally impaired individuals crowd
out other local public expenditures in Sweden. The hypothesis is tested on
five different spending areas using a two-stage least squares (2SLS)
fixed-effects model. While the results give no support for crowding out in
the areas of social assistance, culture & leisure, and childcare &
preschool, a negative relationship on spending for elderly & disabled care
and on spending for education is found, suggesting that crowding out indeed
occurs within the municipal sector. The negative relationships are
significant both in a statistical and an economic sense.
Keywords: Local public expenditures; Spatial econometrics; Intergovernmental grants; Spatial interaction; Intergovernmental grants; Expenditure crowding out; Functionally impaired; (follow links to similar papers)
JEL-Codes: H72; H77; I18; J14; R12; R50; (follow links to similar papers)
158 pages, December 17, 2009
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