Longitudinal Effects of User Charges on the Expenditure Level of Charge-Financed Services: The Georgia Case (1985–2007)

Changhoon Jung, Tae Ho Eom, Juchan Kim and Rui Sun

Municipal Finance Journal, 2009, vol. 30, issue 3, 1 - 28

Abstract: User charges have emerged as one of the major revenue sources for many local U.S. governments since the late 1970s. Because appropriately designed user charge financing can restore a direct relationship between the service received and payment, theoretical discussions have proposed that a greater reliance on user charge financing could result in the reduction of the expenditure level of the charge-financed service compared to traditional tax financing. This study empirically tests such a possibility by examining the level of the expenditure for parks and recreation and garbage collection services in a panel of 546 Georgia cities from 1990 to 2007. The findings in this study confirm that a greater degree of user charge reliance for the two services leads to reduced expenditure, but the magnitude of the reduction effects differs slightly between services.

Date: 2009
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