Bailouts and austerity

Arbeitspapier

This paper studies with disaggregated budget data how expenditures, revenues, and borrowing evolve in municipalities that receive bailouts. It asks whether higher-level governments enforce austerity measures after bailing out indebted municipalities. The sample consists of 421 municipalities in the German federal state of Hesse over the 1997-2010 period. The results indicate that municipalities cut personnel, construction, and social expenditures, increase tax revenues and property tax rates, and reduce deficits after they receive a bailout from the state government. The state government appears to be both able and willing to enforce austerity after granting a bailout.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: cege Discussion Papers ; No. 212

Classification and Topics

• Classification: Wirtschaft ; Fiscal Policies and Behavior of Economic Agents: General ; State and Local Borrowing ; Intergovernmental Relations; Federalism; Secession
• Subject: subnational bailouts ; soft budget constraints ; local fiscal policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Baskaran, Thushyanthan
• Event: Veröffentlichung
• (who): University of Göttingen, Center for European, Governance and Economic Development Research (cege)
• (where): Göttingen
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/98842
• Last update: 10.03.2025, 11:44 AM CET