On The Effects of Local Versus Central Government Financing of Local Services

Muhammed M. Islam
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Muhammed M. Islam: Concordia University

The Review of Regional Studies, 1997, vol. 27, issue 1, 65-83

Abstract: This paper provides some empirical support for pricing a part of local services on user basis. A model of fiscal responses to grants/user fees, based on a vote-maximizing approach, is tested on both time series and pooled data (1977-1991) for 39 upper-tier municipalities in Ontario, Canada. The exogeneity specification of grants is tested and the test results are taken into account in estimating the model. The results indicate that roughly 70 percent of the municipal governments would find it cheaper to finance local spending by grants than by local taxation. If the grant system is abolished, a majority of these governments would prefer to use some sort of user fees in financing local services. The study suggests that local public services can be provided at a substantially lower per-unit cost if some selected services are priced on user basis.

Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:rre:publsh:v:27:y:1997:i:1:p:65-83

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