The demand for local government goods

Abstract. This paper analyses the spending preferences of local government elected politicians. It is argued that the median voter model is inappropriate in multi-party systems that provide multiple government services, and that the preferences of the representatives are consequential to local resource allocation. We develop a micromodel in which service demand is conditioned by exogenous public revenue, prices, and demographic factors. We hypothesise that politicians demands are affected by party affiliation, public sector occupation and committee assignment. The estimates of the micro demand functions are based on data pertaining to Norwegian local governments. It is found that the estimated income elasticities correspond approximately with elasticities of output studies. Party affiliation has an impact on demand patterns, while government occupation and committee appointment are major determinants of politicians desired allocation of public services. Further analyses reveal that the numerical strength of parties impacts weakly on the actual service allocation, whereas the representation of government employees has occasional effect. The budgetary allocations are imperfect expressions of the elected council's underlying preferences.