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This paper examines the appropriateness of the median voter hypothesis within an agenda control framework where the alternative to a proposed expenditure level is the existing level. Evidence from New York State school districts suggests that within this institutional setting the actual level of public service provision does not differ significantly from the median voter's preferred level. The evidence also suggests that demand function parameter estimates for educational expenditures are not sensitive to the assumption that the public service output level corresponds to the median voter's private equilibrium.

In a recent article Richard Wagner (1976) has developed the hypothesis that the structure with which governments raise revenues can affect the level of public expenditures. In addition to providing the theoretical basis for this argument, Wagner empirically tested his hypothesis. The results of this test were supportive. The purpose of this note is to re-examine the empirical test employed by Wagner in light of a criticism of his original econometric specification. The first section briefly reviews Wagner's discussion. The second section presents additional empirical evidence. The final section presents some concluding remarks. 1.Wagner bases his hypothesis on the potential inability of consumer-voters to perceive the true price of public expenditures. Without the knowledge of actual price, consumer-voters must base their collective choice decisions upon their perceived price of public goods. Should the perceived price be less than the true price, more of the public good will be demanded than otherwise and vice versa. According to Wagner's analysis, the manner in which public revenues are collected can play an important role in determining the accuracy of the perceived price of public goods. Complex revenue structures which draw upon different sources -personal income, property, excise taxes, et al. -make it more likely that perceived price will differ from actual price.In order to test the fiscal illusion hypothesis, Wagner defined a Herfindahl index, S, of concentration for the city revenue structure for each of the fifty largest U. S. cities which did not contain dependent school systems. Higher values for S indicate greater simplicity in the revenue structure.

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