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Persistent budget deficits are commonly blamed on irresponsible governments. However, even if the government is fiscally responsible, the agents in charge of implementing the budget may be less concerned about fiscal discipline. According to the survey data analyzed in this paper, such conflicts of interests are associated with low fiscal performance and prevail in almost half of the Swedish municipalities. The empirical analysis points at some organizational features that may affect the prevalence of conflicts, and also indicates that conflicts may arise for reasons exogenous to the organization.

This thesis consists of four self-contained essays on different conflicts shaping local government policy. The first essay examines how population aging affects the generosity of public long-term care. Aging may directly affect long-term care policy as the elderly become a more important voter group. However, concerns for other citizens may dampen the political importance of the elderly. Fixed effects regressions on municipality-level panel data for 1999-2007 suggest that long-term care generosity slightly decreases in response to an aging population. In particular, a smaller share of elderly become entitled to long-term care. The remaining three essays consider determinants of local fiscal performance. The second essay examines a case in which the Swedish central government granted financial assistance to 36 municipalities in financial trouble. The possibility to be bailed out by the central government is often argued to undermine local governments' incentives for fiscal discipline. However, the conditions attached to the grant under study may have reduced the attractiveness of the bailout option. We estimate fixed effects models of operating costs and net revenues during the decade following the announcement of the grant. The estimation sample consists of the municipalities affected by the program and suitable comparison units identified by the synthetic control method. The estimates suggest that the development of operating costs is largely unaffected by the program for most of the admitted municipalities. However, several have increased costs less than expected, and the development of net revenues is favorable for the group as a whole. Thus, we find little evidence that participation in this conditional bailout program undermined subsequent fiscal performance. The third essay examines how fiscal performance is affected by specific institutions aimed at encouraging the budget discipline of agents responsible for policy implementation. We emphasize that these institutions should be of greater importance in municipalities where there is a substantial conflict of interest between the two levels of the municipal hierarchy concerning the importance of fiscal discipline. Regressions on unique survey data from 265 of the 290 Swedish municipalities confirm that the correlation between institutions and fiscal performance depend on the reported strength of conflict between the two levels. A centralized budget process, a credible threat of replacement of managers running deficits, and surplus carry-over rules are all positively correlated to net revenues - but only in municipalities that report substantial conflicts of interest between the two hierarchical levels. However, a deficit carry-over rule is positively correlated to net revenues in municipalities reporting minor conflicts of interest. The fourth essay explores potential determinants of the conflicts of interest reported in the survey. The main findings are that (i) conflicts between the two hierarchical levels are less likely if members of the executive committee chair the local committees; (ii) conflicts are less common in municipalities with fewer committees; and (iii) conflicts are more likely in municipalities with recent experience of deteriorations of the general economic conditions. The first two findings suggest that the center of the municipal hierarchy may use its discretion over appointments and over the number of committees to resolve these conflicts of interests in some instances. However, as the general economic environment is beyond political control, it is difficult to fully prevent conflicts between the central and local level.

AbstractThis paper examines how the aging population affects the generosity of public long‐term care (LTC) in Sweden. Theoretically, aging has a direct effect on LTC policy because the elderly become a more important voter group. However, concerns for other citizens may dampen the political importance of the elderly. Fixed effects regressions on municipality‐level panel data for 1999‐2007 suggest that LTC generosity slightly decreases in response to an aging population. In particular, a smaller share of the elderly become entitled to LTC.

Abstract
The case for competition in health-care markets rests on economic models in which providers seek to maximize profits. However, little is known regarding how public health-care providers, who might not have a profit motive, react to increased competition from private providers. This study considers the heterogeneous effects of a primary health-care reform in a Swedish region that considerably loosened entry restrictions and increased patients' freedom of choice, thus enabling increased competition. Our difference-in-differences analysis contrasts local markets that were affected by both entry and choice with local monopoly markets, which were unaffected by the reforms. Using detailed administrative data on all visits to public health centers in 2008–2011, we find that providers in markets with increasing competition registered more diagnoses in an administrative database, thus increasing their reimbursement per patient. Although the economic significance of the effect is small, the result suggests that public providers are indeed sensitive to competition.

Whenever a central government faces a sub-unit in financial distress, the unpleasant question arises of whether to assist the unit or not. On the one hand, resisting to bail out the unit may lead to default or bankruptcy, which could be very costly both economically and politically. On the other hand, bailouts may increase problems of soft budget constraints: noting that the central government steps in in times of trouble, sub-units may come to expect that bailouts will be available when needed. Restricting attention to the relation between central and local governments, bailouts have been found to be followed by deteriorating fiscal discipline in case studies of several fiscally decentralized countries (e.g. Bordignon and Turati, 2009; Pettersson-Lidbom, 2010; Fink and Stratmann, 2011). Little is however known about whether such tendencies can be dampened if assistance is made conditional upon the local governments' own fiscal efforts. We examine a case in which the Swedish central government provided conditional grants to 36 financially troubled municipalities: to receive the grant, municipalities first had to cut costs and balance their budgets. There were also 23 municipalities that applied for the grant, but whose applications were rejected. We examine the program effect on fiscal discipline over the decade after the launch of the program. Two major identification problems are that the program effect may vary between municipalities, and that selection into the program was not random. We address these two problems by employing the synthetic control method, a case study method developed in Abadie and Gardeazabal (2003) and Abadie et al. (2010), and also combine this method with fixed effects estimations. Our results reveal substantial heterogeneity in the municipal responses to the program and also highlight the importance of the choice of comparison group. For the average effect on admitted municipalities, the main bulk of the evidence point to no increases in the level of per capita costs in the longer run. Fixed effects estimations show consistently better net revenues on average. Moreover, admitted municipalities do better on average than rejected municipalities, who arguably received a signal of hard budget constraints. We conclude that conditional bailouts need not erode fiscal discipline.

Central government bailouts of local governments are commonly viewed as a recipe for local fiscal indiscipline, as local governments learn that the center will come to the rescue in times of trouble. However, little is known about the consequences of bailouts granted conditional on local governments first making efforts to improve the situation. We examine a case in which the Swedish central government provided conditional grants to 36 financially troubled municipalities. We use the synthetic control method to identify suitable comparison units for each of the 36 municipalities. To compare the development of costs and the fiscal surplus of admitted municipalities to that of their most similar counterparts during the decade after the program, we then estimate fixed effects regressions on the resulting sample. The analysis suggests that conditional bailouts did not erode, and may even had induced greater fiscal discipline.

Conflicts of interest within hierarchic government organizations regarding the importance of fiscal discipline create the need for institutions that curb the bargaining power of units in charge of implementing policy and align their incentives to the interests of the whole organization. We examine this general public sector problem by collecting unique data on budget institutions and conflicts of interest within the Swedish municipalities. Our estimations suggest that institutions pertaining to both the planning stage and the implementation stage of the budget process are important for fiscal performance. The fiscal surplus is higher in municipalities that have centralized their budget process to some degree, and where local committees are allowed to carry over surpluses or forced to carry over deficits between fiscal years. The associations however differ between municipalities with different degrees of conflicts of interests, calling for further research to understand the incentives given by the result carry-over rules. We further find that the fiscal surplus is higher in municipalities where local managers face a relatively high risk of dismissal as a consequence of budget deficits.

OBJECTIVE: The objective was to examine the association between primary care consultations and a Care Need Index (CNI) used to compensate Swedish primary care practices for the extra workload associated with patients with low socioeconomic status. DESIGN: Observational study combining graphical analysis with linear regressions of cross-sectional administrative practice-level data. SETTING: Three Swedish regions, Västra Götaland, Skåne and Östergötland (3.5 million residents). Outcomes were measured in February 2018 and the CNI was computed based on data for 31 December 2017. SUBJECTS: The unit of analysis was the primary care practice (n = 390). MAIN OUTCOME MEASURES: i) Number of GP visits per registered patient; ii) Number of nurse visits per registered patient; iii) Number of morbidity-weighted GP visits per registered patient; iv) Number of morbidity-weighted nurse visits per registered patient. RESULTS: The linear associations between the CNI and GP visits per patient were positive and statistically significant (p<0.01) for both the unweighted and weighted measure in two regions, but the associations were mainly due to 10 practices with very high CNI values. The results for nurse visits varied across regions. CONCLUSIONS: For most levels of the CNI, there was no association with the number of consultations provided. This result may indicate insufficient compensation, weak incentives to spend the money, decisions to spend the money on other things than consultations, or stronger competition for patients among low-CNI practices. The result of this observational study should not be taken as evidence against the possibility that the CNI adjustment of capitation may have affected the socioeconomic equity in GP and nurse visits. Key Points Swedish primary care practices receive extra compensation for socioeconomically deprived patients but it is unknown how this affects service provision. Practice-level data from three regions years 2017-2018 indicate weak or no relation between the socioeconomic burden and the number of physical consultations per patient. Results are similar when adjusting for patients' morbidity levels, suggesting that the weak gradient was not explained by longer consultations. The exception is that a small number of practices with very high burdens provide more consultations per patient. The results may reflect insufficient compensation, lack of incentives, or funds being spent on other things than consultations.

Activity-based financing (ABF) and global budgeting are two common reimbursement models in hospital care that embody different incentives for cost containment and quality. The purpose of this study was to explore and describe perceptions from the provider perspective about how and why replacing variable ABF by global budgets affects daily operations and provided services. The study setting is a large Swedish county council that went from traditional budgeting to an ABF system and then back again in the period 2005-2012. Based on semistructured interviews with midlevel managers and analysis of administrative data, we conclude that the transition back from ABF to budgeting has had limited consequences and suggest 4 reasons why: (1) Midlevel managers dampen effects of changes in the external control; (2) the actual design of the different reimbursement models differed from the textbook design; (3) the purchasing body's use of other management controls did not change; (4) incentives bypassing the purchasing body's controls dampened the consequences. The study highlights the challenges associated with improvement strategies that rely exclusively on budget system changes within traditional tax-funded and politically managed health care systems.

AbstractReducing socioeconomic health inequalities is a key goal of most health systems. A challenge in this regard is that healthcare providers may have incentives to avoid or undertreat patients who are relatively costly to treat. Due to the socioeconomic gradient in health, individuals with low socioeconomic status (SES) are especially likely to be negatively affected by such attempts. To counter these incentives, payments are often risk adjusted based on patient characteristics. However, empirical evidence is lacking on how, or if, risk adjustment affects care utilization. We examine if a novel risk adjustment model in primary care affected socioeconomic differences in care utilization among individuals with a chronic condition. The new risk adjustment model implied that the capitation—the monthly reimbursement paid by the health authority to care providers for each enrolled patient—increased substantially for chronically ill low‐SES patients. Yet, we do not find any robust evidence that their access to primary care improved relative to patients with high SES, and we find no effects on adverse health events (hospitalizations). These results suggest that the new risk adjustment model did not reduce existing health inequalities, indicating the need for more targeted incentives and interventions to reach low‐SES groups.

This paper provides a general theoretical framework that captures the essential features of a Swedish reform where private and public health care providers serve patients with certain functional impairments. Because providers receive a fixed hourly compensation for their services (identical across patient types) and only private providers can reject service requests from patients, private providers avoid the costliest patients, resulting in a monetary deficit for public providers. To partially overcome this problem, a multiple pricing (reimbursement) scheme is proposed and its solution is characterized. The results suggest that there are some fundamental trade-offs, e.g., between the goals of containing costs and restricting choices for patients, but that the suggested pricing scheme may substantially reduce the deficits for public providers without affecting the total budget set by the central government.