The Impact of Mandates and Tax Limits on Voluntary Contributions to Local Public Services: An Application to Fire-Protection Services

Abstract

We examine the impact of state-imposed mandates and fiscal limits on volunteer use and fundraising by local governments. Our model of contributions to local public services predicts that fiscal limits increase both volunteer use and fund-raising and that mandates increase volunteer use. These predictions are tested using data on 1,837 fire-protection departments in 28 states in 1993. Our empirical results generally support our theoretical predictions. A fiscal limit makes it 11 percent more likely that a department is volunteer and 14 percent more likely that it engages in fund-raising. A mandated pension increases the probability that a department is volunteer by 14 percent and increases the likelihood that it engages in fund-raising by 5 percent.

JEL Classification: H72