Spatial interaction model of spillovers from locally provided public services

This paper tests the hypotheses that recreational and cultural services provided at the local government level in Sweden are associated with spillovers between municipalities. A representative voter model is derived and the demand for recreational and cultural services is estimated using spatial SUR techniques. The result suggests a negative correlation between recreational and cultural services provided by neighbouring municipalities that indicate that these services are associated with spillovers. In terms of strategic behaviour, this result suggests that these services are strategic substitutes. Moreover, the results provide week evidence that recreational and cultural services provided by local governments are complements.