Reconsidering the Demand for Municipal Public Goods Specification : Evidence from French Municipalities

Abstract

Following Bergtrom and Goodman (1973), this paper can be integrated in the set of studies that have estimated the demand for municipal public services. The main innovation in this paper is methodological as we use a Stone Geary utility function to describe the median voter preferences. Unlike previous studies, we are able to derive the local public expenditure function in a (simplified) linear expenditure system, directly from the theoretical framework. The linear expenditure system provides an estimate of the portion of the incompressible public expenditure in each municipality. Using cross sectional municipal data from France, it is found to be 30% of the total per capita expenditure. Compared to the specification generally used in the literature, linear expenditure system shows a greater sensitivity to price and income variations and reveal a greater number of significant variables.Demand for local public services, Median voter, Linear expenditure system, Nonlinear least squares