Disentangling the Demand Function from the Production Function for Local Public Services: The Case of Public Safety

Robert M. Schwab and Ernest Zampelli, Journal of Public Economics 33(2), 245-260, July .


In this paper we develop a theoretical framework and an econometric model which allow us to separate the effect of income and other socioeconomic variables on the demand for publicly provided goods from their effect on the price of those goods. We apply our approach in a study of expenditures for police protection in a cross-section of 73 U.S. cities and counties. Our results suggest that studies of public expenditures which fail to incorporate community characteristics in production and cost functions can yield very misleading results.

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