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Measuring the Benefits from Public Services The Effects of Local Government Spending on the Distribution of Income in Norway

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Abstract

The purpose of this paper is to provide an evaluation of how local public in-kind benefits affect the distribution of income in Norway. To this end, a method that accounts for differences between municipalities in capacity to produce the same standard of public services is used for assessing the value of sector-specific local public services in each municipality. Next, the underlying justification of the various services is used as basis for determining the allocation of the assessed value of the services on the citizens in the municipalities. For instance, services like health care and care for the elderly and disabled are treated as an insurance arrangement. Thus, the corresponding in-kind benefits are allocated on the potential recipients. By contrast, the value of the production of education and child care is allocated uniformly on the families that receive these services. The empirical results show that the inequality in the (marginal) distribution of municipal in-kind benefits is rather high. The contribution of in-kind benefits to inequality in the distribution of extended income (cash (after-tax) income plus municipal in-kind benefits) is, however, approximately neutral. This result is due to the fact that elderly people and families with children receive the largest share of the municipal in-kind benefits and moreover are located in the central part of the distribution of extended income.

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  • Rolf Aaberge & Audun Langørgen, 2003. "Measuring the Benefits from Public Services The Effects of Local Government Spending on the Distribution of Income in Norway," Discussion Papers 339, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:339
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    1. Ruggeri, G C & Van Wart, D & Howard, R, 1994. "The Redistributional Impact of Government Spending in Canada," Public Finance = Finances publiques, , vol. 49(2), pages 212-243.
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    3. repec:bla:econom:v:52:y:1985:i:27:p:335-44 is not listed on IDEAS
    4. Aaberge, Rolf & Langorgen, Audun, 2003. "Fiscal and Spending Behavior of Local Governments: Identification of Price Effects When Prices Are Not Observed," Public Choice, Springer, vol. 117(1-2), pages 125-161, October.
    5. Audun Langørgen & Rolf Aaberge, 1999. "A Structural Approach for Measuring Fiscal Disparities," Discussion Papers 254, Statistics Norway, Research Department.
    6. Rolf Aaberge & Ingrid Melby, 1998. "The Sensitivity Of Income Inequality To Choice Of Equivalence Scales," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(4), pages 565-569, December.
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    Keywords

    Income distribution; local public finance;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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