No. 16/2006

DO LOCAL AUTHORITIES SET LOCAL FISCAL VARIABLES TO INFLUENCE POPULATION FLOWS?

Fredrik Carlsen

Abstract:
The paper presents an empirical test of local fiscal competition in Norway
based on the observation that interregional migration during the business cycle
creates very different incentives for rural and urban municipalities to influence
population movements. Panel-data evidence is presented suggesting that
municipalities indeed attempt to control population flows. The sensitivity of
municipal spending and revenue decisions to population movements varies between
municipalities in a way that is consistent with the municipalities' incentives to
influence location decisions of households.