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An examination of the dynamic behaviour of local governments using GMM bootstrapping methods
Author(s) -
Dahlberg Matz,
Johansson Eva
Publication year - 2000
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/1099-1255(200007/08)15:4<401::aid-jae564>3.0.co;2-g
Subject(s) - bootstrapping (finance) , econometrics , revenue , economics , panel data , distributed lag , empirical evidence , statistics , mathematics , accounting , philosophy , epistemology
Even though recent Monte Carlo evidence has shown that the use of bootstrap critical values, instead of asymptotic ones, improves the size of the tests substantially, empirical applications using GMM bootstrap techniques are largely missing. In this paper, the dynamic relationship between local government revenues and expenditures is re‐investigated using GMM bootstrapping techniques on a panel of 265 Swedish municipalities over the period 1979–1987. A lag of one year is found in the expenditures equation, while no dynamics is found in the own‐source revenues and grants equations. These results, while contrasting sharply with those obtained when asymptotic critical values are used, are well in line with the theoretical explanations given in the literature for dynamic behaviour in the local public sector. Copyright © 2000 John Wiley & Sons, Ltd.