Local Authority Personal Social Services Expenditure in England : a Spatial Econometric Approach

Moscone (2007) used spatial panel data methods to examine the determinants of local authority spending on mental health services. They demonstrate that spending on mental health services by local authorities in England is not independent of the spending in this area of neighbouring local authorities. Moscone (2007) focussed on the period from 1998 to 2003, and on spending on mental health services for those under 65 (the standard male retirement age in the UK).Why does this matter? Moscone (2007) builds on a spatial and regional literature on local interactions between spending decisions of local government (see for instance Revelli (2006)). Since 2010 there has been increasing focus on devolving decision-making for health services away from central government in England (Wales, Scotland and Northern Ireland operate separate healthcare systems). Given central government's interest in ensuring minimum standards of healthcare across local authority areas, understanding the determinants of local authority spending decisions is essential; in particular if central government intends to try to influence local performance in this area. Key questions in this paper are: do the factors explaining variations in LA expenditure on personal social services (PSS) vary by category of PSS, does greater political competition within a LA drive greater PSS spending, and does the strength of spatial dependence vary by PSS type?This paper makes a number of improvements on Moscone (2007), specifically, we interpret the spatial coefficients correctly by calculating the scalar summaries following LeSage & Pace (2009) and by way of model selection we estimate a nested spatial panel data model, unlike Moscone (2007) who estimate different spatial models and then compare these ex-post. In terms of extensions to Moscone (2007), firstly we consider a broader range of covariates, and secondly we compare spending on mental health services for those below the state retirement age, the focus in Moscone (2007), with spending on those above the state retirement age