Abstract
In this paper a behavioral model of a so-called multi-level government is developed and applied, using the interest function approach to political economic modelling. Three decision-making levels are distinguished: a central government level, an intermediate government level (the ‘provinces’), and a local government level. Emphasis is on the interaction between the decision-making processes at the different levels, and, in particular, the consequences of this interaction on local government expenditure and taxation. Financial (grants system) as well as non-financial (intervention, regulation) influence relationships, shaping the budgetary autonomy of the local governments, are taken account of. The model is applied to the Netherlands, using cross-section data for a sample of 94 Dutch municipalities.
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