Do Local Public Expenditures on Functionally Impaired Crowd Out Other Local Public Expenditures?

Lena Birkelöf ()
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Lena Birkelöf: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

No 797, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: This paper examines whether local public expenditures on services to functionally impaired individuals crowd out other local public expenditures in Sweden. Over the last ten years, these expenditures have increased by more than 90 percent while other municipal expenditures have experienced increases of up to 30 percent. The impact of expenditures on functionally impaired individuals 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 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; Functionally impaired; Expenditure crowding out (search for similar items in EconPapers)
JEL-codes: H72 J14 R50 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2009-12-04
New Economics Papers: this item is included in nep-pbe and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:umnees:0797

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