Is Local Government Spending Converging?

Abstract

A substantial body of theoretical and empirical evidence demonstrates that interregional competition for factors of production leads to convergence of per capita output. Is there an analogous process that leads to convergence of public sector activity? Skidmore et al. develop a model that is consistent with the macroeconomic growth literature, which predicts convergence in government spending. Using this framework, we test for convergence in government spending using detailed data from Wisconsin for a variety of municipal government expenditure categories over the period 1990–2000. Our empirical investigation provides compelling evidence of convergence in per capita government spending for all the expenditure categories we study.