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A Statistical Model of Local Government Distress in Australia
Stewart Jones,
The University of Sydney
Robert G Walker, The University of Sydney
ABSTRACT. This paper develops a statistical model to explain sources of distress in local government. Information regarding the cost of restoring infrastructure is used in this study as a proxy for levels of distress (in contrast to the binary classification that characterizes much of prior private sector financial distress research). Data regarding service levels for a sample of 161 councils for 2001 and 2002 were used and a multiple regression model was estimated and interpreted. The main findings were that the degree of distress in local councils is positively associated with the size of the population they serve and the size and composition of their revenues. Road maintenance costs featured prominently in results, as higher road program costs were associated with higher levels of distress (particularly when interacted with other variables in the study). However, the revenue generating capacity of councils had the strongest statistical impact on local government distress.
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