THE DEMAND FOR LOCAL PUBLIC GOODS: ELASTICITIES OF DEMAND FOR OWN PRICE, CROSS PRICES, AND INCOME

Abstract

Price and income elasticities of demand are estimated for ten local public goods. Unlike other studies, the specification of the demand equations includes prices of other public goods and the impact of grants upon consumer choice. Reasonable success is obtained in estimation to support the influence of cross price effects for eight pairs of public services. Matching grants for highway and education services are assumed to effect consumer behavior either through the tax price or through income. Demand equations for these two public services perform noticeably well.

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