Sungho Park and Ji Hyung Park, “The Effect of Revenue Diversification and Form of Government on Public Spending.” Journal Article

The Effect of Revenue Diversification and Form of Government on Public Spending

Sungho Park (University of Alabama) and Ji Hyung Park (James Madison University)

Journal of Public Budgeting, Accounting & Financial Management (Vol. 30 Issue. 2, pp.211-229 )

Abstract

Funding strategies, as budgetary choices, interacting with political structure, as institutions and structures, may determine the level of public spending as fiscal outputs. Revenue diversification interacting with form of government that has different management behaviors may produce a variation in the level of public spending. The purpose of this study is to understand how revenue diversification interacts with form of government in determining the level of public spending. A cross-sectional research design with the analysis of interaction effects was employed in order to achieve this research objective. Drawing from the economic and financial management perspective on revenue diversification, this study proposes the following hypotheses: (1) In the council-manager form, greater revenue diversification leads to less spending, (2) In the mayor-council form, greater revenue diversification leads to more spending, and (3) Mayor-council governments with diversified revenues spend more than council-manager governments. The results support the second and third hypotheses, but not the first hypothesis.