Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2001:10: The Intertemporal Spending Behavior of Local Governments: A Comparative Analysis of the Scandinavian Countries

Lars-Erik Borge , Matz Dahlberg () and Per Tovmo
Additional contact information
Lars-Erik Borge: Department of Economics, Postal: Norwegian University of Science and Technology, N-7491 Trondheim, Norway
Matz Dahlberg: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Per Tovmo: Department of Economics, Postal: Norwegian University of Science and Technology, N-7491 Trondheim, Norway

Abstract: The paper investigates the intertemporal spending behavior of Scandinavian local governments with particular attention to liquidity constraints imposed by balanced-budget-rules and other regulations. The main finding is that Danish local governments are more able to smooth current expenditures than their Norwegian and Swedish counterparts. Whereas the permanent-income hypothesis cannot be rejected for Denmark, it is in most cases rejected for Norway and Sweden. The Swedish system of market-based control and the Norwegian system of administrative control seem to produce similar results in terms of consumption smoothing.

Keywords: Local government consumption; Intertemporal decision-making

JEL-codes: D99; H72

19 pages, April 9, 2001

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