Co-Partisan Buddies or Partisan Bullies? Why State Supervision of Local Government Borrowing Fails

Arbeitspapier

In many federal countries, local governments run large deficits, even when supervision by state authorities is tight. I investigate whether party alignment of mayors and supervisors influences local government borrowing. The dataset includes 427 local German governments over the period 1999–2012. I exploit variation of a far-reaching institutional reform that entirely re-distributed political powers on both debt issuance and supervision. The results show that short-term deficits of local governments are not enabled by a vertical “buddy” relationship between a mayor and a supervisor affiliated with the same party (co-partisanship) but rather by an ideological “bully behavior” of partisan supervisors and supervisees: left-wing local governments issue more debt, while left-wing supervisory authorities tolerate more debt. These findings imply that political independence for state supervisory authorities is highly recommended.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ifo Working Paper ; No. 189

Klassifikation und Themen

• Klassifikation: Wirtschaft ; National Deficit; Surplus ; State and Local Borrowing ; Intergovernmental Relations; Federalism; Secession
• Thema: Local government ; public deficits ; supervision ; partisan cycle

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Rösel, Felix
• Ereignis: Veröffentlichung
• (wer): ifo Institute - Leibniz Institute for Economic Research at the University of Munich
• (wo): Munich
• (wann): 2014

Weitere Informationen

• Handle: http://hdl.handle.net/10419/108756
• Letzte Aktualisierung: 10.03.2025, 11:41 MEZ