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Local government expenditure decisions: Empirical models for the analysis of spatial data

Revelli, Federico Giovanni; (1998) Local government expenditure decisions: Empirical models for the analysis of spatial data. Doctoral thesis (Ph.D), UCL (University College London). Green open access

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Abstract

This thesis is concerned with the English local authority expenditure decisions in the 1980s. I focus on two features of local governments that might affect their levels of taxation and spending. The first is the presence of a non-linear grant distribution system (the Block Grant). I estimate a demand function for local public spending in the presence of the piecewise-linear non-convex budget constraint created by the Block Grant. Since Ordinary Least Squares yield biased estimates - due to the endogeneity of the choice of segment on the kinked budget constraint - I use a two- error Maximum Likelihood procedure. The second is the spatial character of the data collected at the subcentral government level. Firstly, I explore whether local public expenditure exhibits a spatial pattern. I compute spatial statistics which suggest that local governments' expenditures are positively spatially autocorrelated. Application of spatial econometric models shows that, when allowing both for a spatially lagged dependent variable and for spatial correlation in the error term, most of the spatial correlation in the data is captured by correlated shocks. Secondly, I look at the implications of spatial dependence for local taxation and its effects on local election results. I model the relationship between voters and incumbent governments as a principal agent one, where local jurisdictions are subject to spatially correlated cost shocks and imperfectly informed voters decide whether to re-elect the incumbent after looking at their jurisdiction's relative performance. The empirical evidence on a panel data set of the English districts' elections shows that the own tax has a negative impact on the incumbent's re-election chances, which is only partially offset by the positive impact of neighbouring local governments' taxes. However, local election outcomes also appear to be largely affected by national politics issues.

Type: Thesis (Doctoral)
Qualification: Ph.D
Title: Local government expenditure decisions: Empirical models for the analysis of spatial data
Open access status: An open access version is available from UCL Discovery
Language: English
Additional information: Thesis digitised by ProQuest.
Keywords: Social sciences; Local government expenditures
URI: https://discovery.ucl.ac.uk/id/eprint/10099479
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