Demand for Social Services of City Government Units Using the Linear Expenditure System: The Case of the Philippines

Abstract

The main objective of the study is to construct demand system of the basic social services provided by the city governments in the Philippines using the Linear Expenditure System. It seeks to establish the income and expenditure pattern of city governments of the Philippines in 2008. Results revealed that cities with higher incomes are dependent to locally-generated income while cities with lower incomes are dependent on IRA funds. Expenditure share is highest in the education sector while lowest in the social welfare. Subsistence expenditure level of each service sector was found statistically significant except health and nutrition. Some identified cost variables of respective service sectors were found significant predictors of subsistence expenditure level of each service sectors. Marginal discretionary income shares were found statistically significant across the service sectors except for education. Elasticity results revealed that all basic social services were found to be normal goods and demands for these services tend to be inelastic with respect to government income. Keywords - demand system, discretionary income, IRA, LES, marginal discretionary income, NSUR, simultaneous equation and subsistence expenditure.