Local government expenditure and Quality of Life in Finnish municipalities

Abstract This study investigates whether local government expenditure correlate with the Quality of Life (QoL) of the local population and whether high public expenditure are indicative of high or low QoL. Data, including information on public expenditure and objective QoL indicators, were gathered for Finnish municipalities from several existing databases and cover a period of 2015–2019. A composite indicator was constructed to measure municipal QoL performance. The results indicate that there is a clear correlation between public expenditure and QoL: the higher the public expenditure the lower the QoL of the local population. This is due to a greater demand for public goods in municipalities that have low QoL levels. Further, QoL and public expenditure levels are a fairly constant phenomenon. There was no evidence that changes in public expenditure and QoL would affect each other in the short term. The added value of this paper is that it fills parts of the research gap concerning our knowledge on the empirical links between public expenditure and QoL at the local level.