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Strategic competition in Swedish local spending on childcare, schooling and care for the elderly

Author: Karin Edmark , And

Summary of Working paper 2007:22

This study tests for strategic competition in public spending on
childcare and primary education, and care for the elderly, using panel
data on Swedish municipalities over 1996-2005. The high degree of
decentralization in the organization of the public sector implies that
Swedish data is highly suitable for this type of study. The study
is not limited to interactions in the same type of expenditure, but
also allows for e¤ects across expenditures. The results give no robust
support for the hypothesis that municipalities react on the spending
policy of neighbouring municipalities in the decision on own spending
on care of the elderly, childcare and education.
Keywords: Strategic interactions, Spatial econometrics, Decent-
ralization, Local Public Spending
JEL: C31 H72 H77

This study tests for strategic competition in public spending on childcare and primary education, and care for the elderly, using panel data on Swedish municipalities over 1996-2005. The high degree of decentralization in the organization of the public sector implies that Swedish data is highly suitable for this type of study. The study is not limited to interactions in the same type of expenditure, but also allows for effects across expenditures. The results give no robust support for the hypothesis that municipalities react on the spending policy of neighbouring municipalities in the decision on own spending on care of the elderly, childcare and education.

Keywords: Strategic interactions, Spatial econometrics, Decentralization, Local Public Spending
JEL: C31 H72 H77

Research areas