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Roy Bahl:

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Explanation of the level of local government police expenditures is generally drawn from the results of empirical analyses. However, the assumptions of the underlying statistical model are not realistic for the police function and as a consequence the regression results do not provide useful clues as to the reasons for either the rapid growth in police spending and employment or the wide variation in per capita expenditures among cities. This paper shows—within the context of a traditional consumer maximization model—how the socio-economic characteristics and fiscal capacities of a community determine the level of police expenditures through the effects of these characteristics on the level of police wages and employment. The model is developed by combining an existing body of public finance research with a growing body of labor economics research dealing with the state and local government sector, particularly with estimating the employment demand function and the determinants of the wage rate. Our results suggest that important explanatory variables have been excluded from earlier expenditure determinants studies and have led to serious problems in interpreting statistical results. Moreover, our estimation of a structural model facilitates interpretation of the contributions of supply and demand variables to public expenditure levels as well as enabling us to trace exogenous shocks through the model to their ultimate effects on employment, compensation and expenditure levels.


Originally published in Bahl, Roy W., Richard D. Gustely, and Michael J. Wasylenko. “The Determinants of Local Government Police Expenditures: A Public Employment Approach.” National Tax Journal 31, No. 1 (1978): 67–79.

Posted with the permission of the National Tax Association.

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