The social value of municipal services

Abstract

The services provided by local authorities such as education, recreation, gardening and public cleaning, and water and sewerage are usually defined as public goods that are intended to improve their residents’ quality of life. This paper helps local policy makers to achieve this goal by developing a model that evaluates the contribution of various local services to the quality of life in the community. It then uses data from the Israeli Central Bureau of Statistics to determine the optimal allocation of the community's budget. Our main result is that the local expenditures on education are most effective in improving residents’ wellbeing. In addition, the expenditures on recreation, gardening and public cleaning, and water and sewerage also have a significant impact on the residents’ wellbeing. Finally, we demonstrate that given the decreasing marginal utility of each service, the optimal allocation might be a simultaneous investment in these various services. Our model determines the specific optimal allocations to each service.