Local governments in the wake of demographic change: evidence from German municipalities

Dezentrale Regierungen im Strudel von demographischen Wandel: Evidenz von deutschen Stadtverwaltungen

Benny Geys, Friedrich Heinemann and Alexander Kalb

Discussion Papers, Research Unit: Market Processes and Governance from WZB Berlin Social Science Center

Abstract: German municipalities are expected to suffer from intense demographic changes in the upcoming decades; not only in the form of population losses, but also through a changing demographic structure (i.e. less children and adolescents, more elderly, higher dependency ratio, and so on). We assess local governments’ vulnerability to the fiscal consequences of these demographic transformations (using a sample of 1021 municipalities in the state of Baden-Württemberg) by determining the elasticity of local government cost functions to municipalities’ demographic characteristics. Our findings indicate that smaller municipalities are especially vulnerable to increasing cost pressures following most of the currently predicted demographic changes. In the absence of increased higher-level government support (e.g. through the fiscal equalization scheme), these findings would support a case for boundary reviews or more extensive inter-communal cooperation.

Keywords: Demographic change; local government expenditures; cost elasticity; economies of scale; rolling regression; German municipalities (search for similar items in EconPapers)
JEL-codes: H72 J11 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (15)

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Journal Article: Local Governments in the Wake of Demographic Change: Evidence from German Municipalities (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wzbmpg:spii200819

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