In the present paper we analyse the allocation process of cultural services in Norwegian municipalities. The cultural sector on this administrative level is decomposed into the following eight subcategories: children and youth activities, libraries, cinemas, museums, arts dissemination, sports, cultural schools, and other cultural services. By means of budget shares for these eight cultural services and a residual sector consisting of all other municipal services, we estimate a system of demand relations which are interdependently linked to each other by a budget restriction. Our analyses are based on data from 406 out of 429 Norwegian municipalities during the period 2002 to 2010. In the empirical analyses we mainly focus on the effects of income variation for the cultural services. We estimate effects of free income, matching grants to each sector, and user fees and other sector-specific income for each sector. We also estimate crowding-out effects for the cultural sectors of demographic variables indicating higher demand for services like education, child care, and health services. Our results confirm previous results. There are interesting differences within the group of cultural services, and these are partly related to different national standardization and regulation among the cultural services. In the concluding section we discuss some cultural policy implications of the results obtained.
