TY - JOUR
T1 - The 'rationality' of municipal capital spending. Evidence from New Jersey
AU - Holtz-Eakin, Douglas
AU - Rosen, Harvey S.
N1 - Funding Information:
*This research is part of the NBER Project on State and Local Government Finance. We are grateful to Cynthia Miller for superb research assistance; to Rosanne Altshuler, Robert Inman, John Yinger, and a referee for helpful comments; and to a grant from The Olin Foundation to Princeton University for financial support. ‘U.S. Bureau of the Census (1987, p. 258).
Copyright:
Copyright 2014 Elsevier B.V., All rights reserved.
PY - 1989/8
Y1 - 1989/8
N2 - Some analysts interpret movements in capital spending by sub-federal levels of government as rational reactions to changing economic and demographic conditions. Others attribute changes to myopic decision-making by politically motivated government officials. In this paper we present a formal definition of 'rational' decision-making that is amenable to econometric testing, and utilize panel data on capital spending by a sample of New Jersey municipalities to test it. We find that on the basis of data from all communities, one cannot reject the joint hypotheses of forward-looking, rational, and unconstrained planning. However, the behavior of capital spending differs sharply between both suburban versus non-suburban communities, and between small versus large communities.
AB - Some analysts interpret movements in capital spending by sub-federal levels of government as rational reactions to changing economic and demographic conditions. Others attribute changes to myopic decision-making by politically motivated government officials. In this paper we present a formal definition of 'rational' decision-making that is amenable to econometric testing, and utilize panel data on capital spending by a sample of New Jersey municipalities to test it. We find that on the basis of data from all communities, one cannot reject the joint hypotheses of forward-looking, rational, and unconstrained planning. However, the behavior of capital spending differs sharply between both suburban versus non-suburban communities, and between small versus large communities.
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U2 - 10.1016/0166-0462(89)90017-3
DO - 10.1016/0166-0462(89)90017-3
M3 - Article
AN - SCOPUS:38249004439
SN - 0166-0462
VL - 19
SP - 517
EP - 536
JO - Regional Science and Urban Economics
JF - Regional Science and Urban Economics
IS - 3
ER -