Umeå Economic Studies,
Umeå University, Department of Economics

Abstract: This paper analyzes the composition of municipal expenditures in Sweden by estimating a demand system for local public services, in which tax revenue collection is treated as endogenous. The estimation is based on the QAIDS specification. The empirical application uses panel data for the period 1998-2005 and for six local public services. The results show that the point estimates of all income elasticities except one are positive, and that none of them significantly exceeds one. Furthermore, the point estimates of the own-price elasticities are negative and less than one in absolute value for all services.

Keywords: Demand system; local public finance; local government spending

JEL-codes: D12; H71; H72

42 pages, March 10, 2008

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