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Why do per-household expenditures differ between municipalities?

Author: JOSEPH KUSHNER and TOMSON OGWANG
Published in PFM, Vol. 17 No. 4

The purpose of this paper is to identify the factors that account for variation in per-household expenditures between municipalities. Using multiple regression techniques, we find that it is advantageous for a community to have growth and a high percent of non-residential to residential assessment. We also find that larger sized municipalities have higher per-household expenditures. However, the impact of size on the various categories is mixed with some being subject to economies of scale whereas others are subject to diseconomies. Thus, there is a potential for municipalities to lower their expenditures by growth, by increasing commercial and industrial assessment and by consolidating with other municipalities those services that are subject to economies of scale. Since 80% of expenditures in Ontario are financed by local revenues such as taxes and user fees, the determinants of expenditures should give an indication as to why these local revenue sources differ between municipalities.

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