Local government finance: A case study of municipal in Thailand

In a decentralized fiscal system, it has been suggested that socio-economic characteristics have a more profound impact upon the fiscal system than do the political variables. However, in a centralized fiscal system, local government finance is constrained not only by limited local autonomy by the central government but also must respond to local demand influences on fiscal behavior. It is of interest to assess the responsiveness of the local government fiscal behavior to local socio-economic characteristics. The variation in the municipal fiscal system are analyzed using data from municipalities in Thailand during 1979-1982 as a case study. The reason for using municipalities as the case study is because of their relatively greater degree of autonomy over their fiscal systems. This study divided the municipalities into three types, namely, Nakorn, Muang, and Tambon, according to the central government classification. The purpose of this study is to explore the relationship between municipal fiscal systems and differences in local socio-economic conditions. The municipal fiscal study here includes both revenue and expenditures. On the revenue side, the study analyzes the variation of municipal revenue from both tax and non-tax revenues. On the other hand, the municipal expenditure included in this study are services required by the central government, i.e., primary education, public administration, public works, public health services, public safety, sanitation, central and specific funds. The variation of each revenue and expenditure is studied in terms of its relationship to income, relative size of the municipal population, and population density. Because of data limitations neither a behavioral function nor a budget constraint could be specified to obtain a formal demand equation. Therefore, the results of the statistical estimation of the model employed can only be interpreted as a measure of the systematic variations in municipal fiscal systems, not the determinants of the levels of these revenues and expenditures. The results show that while there exist differences in the level of revenue and expenditure in each type of municipality, the socio-economic variables are generally not significant in explaining the variation of revenues and expenditures. The political factors have a considerably larger effect on the variation of municipal fiscal systems. One of these factors is the previous year revenue and expenditure level