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Intergovernmental grants and local public expenditure decision: Interaction due to information spillover
Umeå University, Faculty of Social Sciences, Department of Economics.
2009 (English)Report (Other (popular science, discussion, etc.))
Abstract [en]

This empirical study takes advantage of a new intergovernmental grant in order to investigate the expenditure behavior of the municipalities in Sweden 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 grant and expenditures studied here pertain to one specific service area of the Swedish municipalities; services to functionally impaired individuals. The grant was introduced in 2004. The data used pertains to the period before (2001-2003) and after (2004-2007) the introduction of the grant. A fixed-effects spatial lag model is used to study the (possible) spatial interactions among municipalities. Interestingly, the results show that during the first time period, the municipalities interact with their neighbors when setting the expenditure level, possibly due to mimicking. In the second time period, after the introduction of the grant, there is no evidence of interaction. This would support the hypothesis that the governmental grants provide information to the municipalities and the need for mimicking diminishes with the grant.

Place, publisher, year, edition, pages
Umeå: Umeå universitet, Institutionen för Nationalekonomi , 2009. , 29 p.
Series
Umeå economic studies, ISSN 0348-1018 ; 796
Keyword [en]
Local public expenditures, Intergovermental grants, Spatial interaction
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:umu:diva-30225OAI: oai:DiVA.org:umu-30225DiVA: diva2:281070
Available from: 2009-12-14 Created: 2009-12-14 Last updated: 2009-12-17
In thesis
1. Spatial interaction and local government expenditures for functionally impaired in Sweden
Open this publication in new window or tab >>Spatial interaction and local government expenditures for functionally impaired in Sweden
2009 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

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.

Place, publisher, year, edition, pages
Umeå: Nationalekonomi, Umeå universitet, 2009. 25 + 3 papers p.
Series
Umeå economic studies, ISSN 0348-1018 ; 798
Keyword
Local public expenditures, Spatial econometrics, Spatial interaction, Intergovernmental grants, Expenditure crowding out, Functionally impaired.
National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:umu:diva-30216 (URN)978-91-7264-930-9 (ISBN)
Public defence
2010-01-22, Samhällsvetarhuset Hörsal S205h, Umeå universitet, Umeå, 13:15 (English)
Opponent
Supervisors
Available from: 2009-12-18 Created: 2009-12-14 Last updated: 2009-12-18Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
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