New Contributions to the Norwegian County Municipal Revenue Equalization System
Oslo, 15.05.2026
Commissioned by the Norwegian Ministry of Local Government and Regional Development, Vista Analyse has conducted two new studies on possible revisions to the expenditure equalization component of the Norwegian county municipal revenue equalization system. The reports were launched at the Ministry’s consultation meeting on the system.
The first report concerns the identification of suitable criteria for the design of the expenditure equalization system, given that the limited number of county municipalities constrains the available data. The report can be read here. The second report examines appropriate measures of distance-related disadvantages in the expenditure equalization system and can be read here. In addition, Vista Analyse’s previous study on the inclusion of capital costs in the expenditure equalization component of the Norwegian municipal revenue equalization system was discussed.
– We would like to thank the Ministry for interesting assignments and a good collaboration, says project manager Rasmus Bøgh Holmen.
Below, we provide brief summaries of the two new reports. Please contact partner Rasmus Bøgh Holmen by phone at (+47) 98 48 00 12 or by email at rasmus.bogh.holmen@vista-analyse.no if you have any questions.
Handling Small Datasets in the Norwegian County Municipal Revenue Equalization System
Determining the criteria in the county municipal revenue equalization system is not straightforward, as there are relatively few county municipalities on which to base regression analyses. While public commissions have devoted increasing attention to the challenges associated with having few observational units when determining the criteria in the county municipal revenue equalization system, systems in other sectors and countries rely extensively on formula-based models and cost estimates.
We generally recommend that the criterion analyses for the county municipalities be conducted using linear panel data models, thereby exploiting the time dimension of the data while adhering to methodologies that are familiar to stakeholders in the revenue equalization system. The choice of models and data used to determine the criterion weights should be based on empirical testing and model evaluation.
Handling Distance-Related Disadvantages in the Norwegian County Municipal Revenue Equalization System
Distance-related disadvantages give rise to substantial differences in county municipal service production and are therefore included in the expenditure equalization component of the county municipal revenue equalization system. The current travel-distance criterion has been developed and evaluated over several years, with limited inspiration drawn from comparable systems elsewhere.
The travel-distance criterion has demonstrated reasonable explanatory power in the criterion regressions used in the county municipal revenue equalization system, but it lacks the same theoretical foundation for measuring distance-related disadvantages as market-access measures. Measuring complex forms of distance-related disadvantages in county municipal service production requires advanced estimation techniques, although it is also possible to test existing measures of distance-related disadvantages. While alternative measures have a clearer theoretical and empirical foundation, whether replacing the current measure would provide added value remains an empirical question.