The Linear Expenditure System and the Demand for Municipal Public Services: The Median Voter Specification Revisited

Abstract

Following Bergstrom and Goodman (1973), this paper contributes to the set of studies estimating demand for publicly provided goods and services. The main innovation in this paper is methodological as it uses a Stone–Geary utility function to describe median voter preferences. Unlike in previous studies, the local public expenditure function, in a (simplified) linear expenditure system, can be derived directly from the theoretical framework. The translated expenditure function provides an estimate of the minimum required local public services in each municipality. Using cross-sectional municipal data from France, it is found to be, at the most, 30 per cent of the total per capita expenditure. Compared with the specification conventionally used in the literature, linear and non-linear expenditure systems show a greater sensitivity to price and income variations and reveal a greater number of significant variables.