Abstract
Ph.D. (Economics)
This thesis is an empirical study of municipal expenditure in South Africa. The analysis was carried out in four sub-topics: (a) the spillover effects of municipal expenditure on community services, (b) the dynamics of municipal fiscal adjustment, (c) the crowding-out effects between components of municipal expenditure, and (d) the convergence of municipal expenditure.
The main objective of the first sub-topic, whose analysis is presented in Chapter 2, was to test the hypothesis that community services supplied by municipalities in South Africa are characterised by spillovers. The detection of the spillover effects was done through the analysis of strategic interactions between neighbouring municipalities‟ current expenditure on community services. Budget information for a sample of 192 out of 278 municipalities was collected and spatial econometric techniques were applied to estimate the functions of municipal current expenditure for community services. The empirical findings suggest that there are strategic interactions between neighbouring municipalities‟ current expenditure on community services. Despite the presence of these strategic interactions, the hypothesis of spillover effect was refuted because the estimated spatial lag coefficients of the SDM models were positive and not negative. It was suspected that the yardstick competition may be the source of strategic interactions. Therefore, there was evidence that community services provided by neighbouring municipalities in South Africa are complementary and not supplementary goods ...