Are Local Governments Governed by Forward Looking Decision Makers?

Matz Dahlberg () and Tomas Lindström
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Tomas Lindström : Riksbanken, Postal: Ekonomiska avdeln., SE-103 37 Stockholm, Sweden

No 1996:20, Working Paper Series from Uppsala University, Department of Economics

Abstract: In this paper we investigate the extent to which local government consumption in Sweden is determined by permanent rather than current resources. Evidence from a panel of municipalities indicates that most consumption (90-95 percent) is associated with permanent resources. That is, spending decisions on non-durable goods and services in Swedish municipalities are to a very high degree determined by rational, forward looking decision makers. This result contrasts sharply with the common view that local governments do not act intertemporally. One policy implication is that it might be difficult for the central government to conduct stabilization policy by influencing the municipalities' current resources.

Keywords: Local government consumption; Intertemporal decision making (search for similar items in EconPapers)
JEL-codes: D99 H72 (search for similar items in EconPapers)
Pages: 29 pages
Date: 1996-09-23
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Citations: View citations in EconPapers (8)

Published in Journal of Urban Economics, 1998, pages 254-271.

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:uunewp:1996_020

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