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The Municipal Equalization System and its Implications for Economic Growth and Efficiency

Sundin, Evelina LU and Dufvenberg Ivarsson, Evy (2023) NEKP01 20231
Department of Economics
Abstract
This paper investigates the correlation between Sweden's municipal equalization system and economic growth and efficiency for the years 2005 to 2022. This paper uses panel data for all 290 municipalities and a fixed effects model to study the two main parts of Sweden's municipal equalization system: the income equalization system and the cost equalization system. This paper examines multiple variables that are associated with a municipality's economic growth and efficiency. These variables include Gross Regional Product (GRP), tax capacity, employment, tax rate, aggregated costs, as well as several variables related to disaggregated costs. Dummy variables are used to categorize municipalities based on traits such as population density,... (More)
This paper investigates the correlation between Sweden's municipal equalization system and economic growth and efficiency for the years 2005 to 2022. This paper uses panel data for all 290 municipalities and a fixed effects model to study the two main parts of Sweden's municipal equalization system: the income equalization system and the cost equalization system. This paper examines multiple variables that are associated with a municipality's economic growth and efficiency. These variables include Gross Regional Product (GRP), tax capacity, employment, tax rate, aggregated costs, as well as several variables related to disaggregated costs. Dummy variables are used to categorize municipalities based on traits such as population density, marginal effects, and whether they contribute (give) to or receive (take) benefits from the system allowing comparisons between municipalities. The aim of this paper is to contribute to the limited existing literature on this subject by offering insights into how the system correlates with municipal incentives for fostering economic growth and efficiency. This will be achieved by examining variables related to growth and spending in municipalities. Overall, the estimates presented in this paper do not provide reliable evidence of a correlation between the system and economic growth and efficiency. Yet, some findings in this study suggest a connection between the system and economic growth and efficiency. For example, variables like aggregated costs and the arena variable indicate a correlation. (Less)
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author
Sundin, Evelina LU and Dufvenberg Ivarsson, Evy
supervisor
organization
course
NEKP01 20231
year
type
H2 - Master's Degree (Two Years)
subject
keywords
The Municipal Equalization System, Income Equalization, Cost Equalization, Sweden, Fiscal Federalism, Economic Efficiency, Marginal Effects
language
English
id
9127543
date added to LUP
2023-09-04 09:08:51
date last changed
2023-09-04 09:08:51
@misc{9127543,
  abstract     = {{This paper investigates the correlation between Sweden's municipal equalization system and economic growth and efficiency for the years 2005 to 2022. This paper uses panel data for all 290 municipalities and a fixed effects model to study the two main parts of Sweden's municipal equalization system: the income equalization system and the cost equalization system. This paper examines multiple variables that are associated with a municipality's economic growth and efficiency. These variables include Gross Regional Product (GRP), tax capacity, employment, tax rate, aggregated costs, as well as several variables related to disaggregated costs. Dummy variables are used to categorize municipalities based on traits such as population density, marginal effects, and whether they contribute (give) to or receive (take) benefits from the system allowing comparisons between municipalities. The aim of this paper is to contribute to the limited existing literature on this subject by offering insights into how the system correlates with municipal incentives for fostering economic growth and efficiency. This will be achieved by examining variables related to growth and spending in municipalities. Overall, the estimates presented in this paper do not provide reliable evidence of a correlation between the system and economic growth and efficiency. Yet, some findings in this study suggest a connection between the system and economic growth and efficiency. For example, variables like aggregated costs and the arena variable indicate a correlation.}},
  author       = {{Sundin, Evelina and Dufvenberg Ivarsson, Evy}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Municipal Equalization System and its Implications for Economic Growth and Efficiency}},
  year         = {{2023}},
}