Race to the debt trap? Spatial econometric evidence on debt in German municipalities

Thorsten Martin, Frank Fossen and Ronny Freier

VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association

Abstract: Through an intertemporal budget constraint, jurisdictions may gain advantages in tax and spending competition by 'competing' on debt. While the existing spatial econometric literature focuses on tax and spending competition, very little is known about spatial interaction via public debt. This paper estimates the spatial interdependence of public debt among German municipalities using a panel on municipalities in the two largest German states from 1999 to 2006. We find signifi cant and robust interaction eff ects between debt of neighboring municipalities, which we compare to spatial tax and spending interactions. The results indicate that a municipality increases its per capita debt by 16-33 Euro as a reaction to an increase of 100 Euro in neighboring municipalities.

JEL-codes: C23 H63 H74 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Race to the debt trap? — Spatial econometric evidence on debt in German municipalities (2015)
Working Paper: Race to the Debt Trap?: Spatial Econometric Evidence on Debt in German Municipalities (2014)
Working Paper: Race to the debt trap? Spatial econometric evidence on debt in German municipalities (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc14:100453

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