The evolution of the welfare state in the twentieth century has changed local public finance considerably. This article investigates determinants of local public spending in Norway since the s with an emphasis on the fiscal year -. We document huge variation in local government spending in -. The disparities initiated several reforms in the s with the aim of reducing the inequality. The changes in regional policy over time are illustrated by correlation coefficients between

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... unicipal spending and private income. The correlation is strongly positive in -, but is reduced over time, and has been negative since the s. We find that the variation in spending between local governments is reduced over time mainly for two reasons. First, while the elasticity of municipal spending with respect to private income is fairly constant over time, the variation in private income has become smaller. Second, grants from the central government have become a larger part of the local governments' budgets and are to an increasing degree used for redistributional purposes.