The Linear Expenditure System and the Demand for Municipal Public Services: The Median Voter Specification Revisited

Following Bergstrom and Goodman (1973), this paper contributes to the set of stud-ies estimating demand for publicly provided goods and services. The main innova-tion in this paper is methodological as it uses a Stone–Geary utility function to describe median voter preferences. Unlike in previous studies, the local public expenditure function, in a (simplified) linear expenditure system, can be derived directly from the theoretical framework. The translated expenditure function pro-vides an estimate of the minimum required local public services in each municipal-ity. Using cross-sectional municipal data from France, it is found to be, at the most, 30 per cent of the total per capita expenditure. Compared with the specification con-ventionally used in the literature, linear and non-linear expenditure systems show a greater sensitivity to price and income variations and reveal a greater number of sig-nificant variables. 1