Myopic or Constrained by Balanced-Budget Rules? The Intertemporal Spending Behavior of Norwegian Local Governments

Lars-Erik Borge and Per Tovmo

FinanzArchiv: Public Finance Analysis, 2009, vol. 65, issue 2, pages 200-219

Abstract: The paper analyzes the intertemporal spending behavior of Norwegian local governments with particular attention to liquidity constraints imposed by balanced-budget rules. The main findings are: (i) On average, local government spending behavior is neither perfectly forward looking nor fully myopic. (ii) Local governments with good fiscal conditions behave more forward looking than other local governments. (iii) A high degree of party fragmentation is associated with less forward-looking behavior. The overall assessment is that the departure from rational forward-looking behavior reflects both liquidity constraints imposed by balanced-budget rules and myopic behavior.

Keywords: balanced-budget rules; intertemporal spending behavior; consumption smoothing; local government (search for similar items in EconPapers)
JEL-codes: D91 H72 (search for similar items in EconPapers)
Date: 2009

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Working Paper: Myopic or constrained by balanced-budget-rules? The intertemporal spending behavior of Norwegian local governments (2007)
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