A comprehensive model for the evaluation of standard expenditure needs and standard level of local services

ABSTRACT

This paper addresses the problem of the simultaneous evaluation of local governments’ standard expenditure needs together with the related level of standard public services proposing a new approach to fiscal equalisation based on quantitative methods. Standard expenditure needs are estimated using quantile regression, moreover robust non-parametric methods are employed for the computation of composite indicators of demand and supply factors. Data from English local authorities over the period 1997–2006 have been used to test the internal and external validity of the model.