Spatial Interaction and Local Government Expenditures for Functionally Impaired in Sweden

Lena Birkelöf (lena.birkelof@econ.umu.se)
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Lena Birkelöf: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

No 798, Umeå Economic Studies from Umeå University, Department of Economics

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 (search for similar items in EconPapers)
JEL-codes: H72 H77 I18 J14 R12 R50 (search for similar items in EconPapers)
Pages: 158 pages
Date: 2009-12-17
New Economics Papers: this item is included in nep-geo, nep-pbe and nep-ure
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