Fiscal and Economic Effects of Local Austerity
Melinda Fremerey,
Andreas Lichter and
Max Löffler
No 9800, CESifo Working Paper Series from CESifo
Abstract:
We study the consequences of a large-scale austerity program targeting financially-constrained municipalities in Germany. For identification, we exploit the quasi-random assignment of treatment among equally-distressed municipalities using a difference-in-differences design. The policy helped targeted municipalities to consolidate budgets. Whereas the amount of fiscal consolidation was homogeneous among treated municipalities, strategies of consolidation differed between smaller and larger municipalities. The former primarily cut spending on local public services, whereas the latter predominantly relied on tax increases. We detect no adverse economic effects but sizable negative effects on population levels and house prices in municipalities reducing local amenities.
Keywords: austerity; fiscal consolidation; local amenities; taxes; spatial equilibrium (search for similar items in EconPapers)
JEL-codes: H11 H30 H73 H74 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-eur, nep-pub and nep-ure
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Citations: View citations in EconPapers (6)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9800
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