Local spending and the housing boom

Albert Solé-Ollé () and Elisabet Viladecans-Marsal
Additional contact information
Albert Solé-Ollé: Universitat de Barcelona & IEB

No 2011/27, Working Papers from Institut d'Economia de Barcelona (IEB)

Abstract: We study the inter-temporal spending behavior of Spanish local governments during the last housing boom (1997-2006), a period of substantial short-run momentum in housing-construction revenues. We argue that the unprecedented growth in these revenues might be one of the reasons underlying the increase in the sensitivity of local government spending to (predictable) revenue changes. To detect evidence of this, we study whether local spending decisions are consistent with forward-looking behavior, working within the framework provided by Holtz-Eakin et al. (1994). Our principal findings are: (i) Local spending shows substantial sensitivity to predictable changes in revenues, suggesting that Spanish local governments did not behave as fully forward-looking agents. (ii) The departure from this benchmark was much higher in those years and/or in those housing markets in which the housing boom was most intense. (iii) The sensitivity was not as great to changes in housing construction revenues as it was to changes in ordinary revenues, but this distinction became blurred as the boom intensified.

Keywords: local government; inter-temporal spending behavior; housing cycle (search for similar items in EconPapers)
JEL-codes: D91 H72 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://ieb.ub.edu/wp-content/uploads/2018/04/2011-IEB-WorkingPaper-27.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ieb:wpaper:doc2011-27

Access Statistics for this paper

More papers in Working Papers from Institut d'Economia de Barcelona (IEB) Contact information at EDIRC.
Bibliographic data for series maintained by ().