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As the result of a major local government reform in 1970, most welfare functions in Denmark are dealt with at the local level of government, effectively turning the extensive Danish "welfare state" into "welfare communes" as municipalities are called in the Scandinavian languages. With more than half of the country's total public expenditure being spent by local authorities, regulation of local govenment budgets has become a major concern in the economic policy of the Danish central government. Since the early 1980s the realization of the goal of limited growth in Danish local government spending has been quite successful. One explanation for this comparatively successful regulation of local government spending in Denmark can be foundin the combined effects of two factors: 1) Danish local authorities have the independent right to levy taxes, and 2) the regulation of local budgets is the result of a negotiated agreement between central and local government actors, known in Danish as "budgetary cooperation."

This symposium examines recent developments in public financial management in the European Community (EC). Prior to 1994, this community had twelve country members. It is almost impossible to cover all aspects of the public financial management development of all EC country members. Moreover, the sympo-sium does not cover the most recent changes made by each EC member in order to reach a fiscal unification set for 1992. Five of the six articles for the symposium cover Denmark, Great Britain, Germany, the Netherlands, and Spain. The sixth article examines common features of public financial management developments as well as revenue and outlay trends in all EC countries.

This study uses micro-data to analyze wage formation in the Nordic countries at the regional level. Our results deviate systematically from the main conclusions drawn by Blanchflower and Oswald (1994). We do find a significant negative long-run relationship between unemployment and real wages at the regional level. However, we find no stable negative relation between wages and unemployment across regions in the Nordic labor markets once regional fixed effects are accounted for. Wage formation at the regional level is characterized by considerable persistence, but unemployment exerts no immediate influence on wages at the regional level. There is no evidence of a transitory wage curve, nor of a Phillips curve, at the regional level in the Nordic countries. The results are consistent with a theoretical model where central bargaining agents