Quality,quantity and total expenditures on publicly provided goods: the case of public mental hospitals

This paper proposes a positive model of public sector resource allocation for goods where quality, as well as quantity, is a salient dimension. The model views decisions about quality, quantity, and total expenditures as occuring within a ‘zone of contention’, bounded by minimum requirements for quality and quantity - reflecting technological, regulatory and legal constraints - and a maximum ceiling on total expenditures. The model is consistent with a number of alternative views of the political market place. It is formally derived from a Stone- Geary-type objective function. For purposes of estimation, the model can be transformed into a special case of the CALM model Fischer and Kamlet (1984)]. The identification requirements for the CALM model are derived. The model is then applied to state expenditures on mental hospitals.