Arbeitspapier

Housing booms and busts and local fiscal policy

This paper examines how local governments adjust their spending, savings and taxes in response to a temporary revenue windfall generated by a housing boom and how they cope with the inevitable shortfall that appears during the bust. We focus on Spanish local governments given the intensity of the last housing boom-bust experienced there and the large share of construction-related revenues they obtain. We find, first, that just a small share of the boom windfall was saved, with revenues being used primarily to increase spending (above all, current spending) and (to a lesser extent) to cut taxes. Second, we find that the failure to save during the boom is higher in places with less informed voters and more contested elections. Third, we also examine the what happens during the bust, and find that these governments had to cut abruptly their spending (above all, capital), raise taxes, and allow deficits to grow. Finally, in places wit less informed voters and more contested elections local governments had more trouble in adjusting during the bust, and they tend to rely more on spending cuts than on tax increases.

Language
Englisch

Bibliographic citation
Series: ZEW Discussion Papers ; No. 17-001

Classification
Wirtschaft
Fiscal Policy
State and Local Budget and Expenditures
Subject
tax volatility
forward-looking behaviour
voter information

Event
Geistige Schöpfung
(who)
Solé-Ollé, Albert
Viladecans-Marsal, Elisabet
Event
Veröffentlichung
(who)
Zentrum für Europäische Wirtschaftsforschung (ZEW)
(where)
Mannheim
(when)
2017

Handle
URN
urn:nbn:de:bsz:180-madoc-418363
Last update
10.03.2025, 11:44 AM CET

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Solé-Ollé, Albert
  • Viladecans-Marsal, Elisabet
  • Zentrum für Europäische Wirtschaftsforschung (ZEW)

Time of origin

  • 2017

Other Objects (12)