The Structure of State and Local Government Production

Paul R. Blackley and Larry DeBoer ()
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Paul R. Blackley: LeMoyne College

Public Finance Review, 1991, vol. 19, issue 2, 147-165

Abstract: Static and dynamic translog cost models for the aggregate U.S. state and local government sector are estimated for 1952 to 1985. Inputs are capital, labor, and a combined nondurable goods and other services input, which includes "privatized" services. Estimates show that capital and labor are complements and own-price inelastic. The nondurable-service input is a substitute for both labor and capital and has an own-price elasticity closer to unity. It is used relatively more as the sector expands. The results offer an explanation for the characterization of the government as a low productivity industry and show an economic rather than political motivation for the privatization of some public services.

Date: 1991
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:19:y:1991:i:2:p:147-165

DOI: 10.1177/109114219101900202

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