THE DEMAND FOR PUBLIC SERVICES: INFERENCES FROM MUNICIPAL BOND REFERENDA

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Abstract
This paper developes and estimates the parameters of a model determining the outcome of bond elections for Ohio communities between 1968-1972. The model can be interpreted as giving either a supply function for municipal debt or a demand function for local government services. Our results suggest that the elasticities of demand with respect to the tax-price, variable factor prices paid by the community and interest rates are: 0.10-0.15, 0.02-0.10, and 0.01-0.07, respectively. Hence the primary effect of changes in factor prices is upon the size of the budget and not on the quantity of services.