This article estimates a more general demand function for local fire services
simultaneously with a flexible cost function. Besides the standard income and price
variables, the demand model includes estimates of marginal cost, tax exporting, and
debt financing. Using these results, it is possible to reject several of the common
assumptions about public sector technology and costs made in past demand re search. When the estimates of the demand model proposed in this study are compared
to a standard expenditure demand model, there are major differences. In particular,
the elasticity with respect to median income was found to be significantly higher
using the more general model, which suggests that misspecification of the demand
function may partially account for previous findings of a "flypaper effect."
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