Administrative Cost of US Counties and Local Context Dependence

Abstract

In this paper, we investigate the spatial variations in the operational expenditures of US county governments using a novel method: the bivariate penalized spline estimation over triangulation (BPST) method. We find that the costs of providing population- and health-related services are spatially non-stationary and are affected by local characteristics, like governance structure, natural amenities, and rural-urban status. In general, county operational expenditures are higher in rural counties with more governance autonomy. The marginal administrative cost for providing population-related services is lower for counties with more elected officials. In amenity-rich counties, the administrative costs are less responsive to wage and population increases but more responsive to health-related services.