As a result of the system of central government grants-in-aid, local authorities in England have until recently faced piecewise linear budget constraints. A two-error estimation technique is used to analyze local authority expenditure decisions given these nonlinear budget constraints, and...

Two of the most widely referred to models of local (or state) budgetary behavior are developed and tested. The models considered are a variant of the flypaper model (see, for example, Courant et al., 1979 and Oates, 1979) and a conventional model which builds on the seminal work of Wilde (1969,...