Race to the debt trap? - Spatial econometric evidence on debt in German municipalities
- 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. If jurisdictions compete for mobile capital to finance public spending, they may compete in debt levels as well as taxes. We use a theoretical model to derive the reaction of jurisdictions' debt levels to their neighbors' debts. We then estimate 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 significant and robust interaction effects between debt levels 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. (C) 2015 Elsevier B.V. All rightsThrough 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. If jurisdictions compete for mobile capital to finance public spending, they may compete in debt levels as well as taxes. We use a theoretical model to derive the reaction of jurisdictions' debt levels to their neighbors' debts. We then estimate 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 significant and robust interaction effects between debt levels 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. (C) 2015 Elsevier B.V. All rights reserved.…
Verfasserangaben: | Rainald BorckORCiDGND, Frank M. Fossen, Ronny Freier, Thorsten MartinORCiDGND |
---|---|
DOI: | https://doi.org/10.1016/j.regsciurbeco.2015.04.003 |
ISSN: | 0166-0462 |
ISSN: | 1879-2308 |
Titel des übergeordneten Werks (Englisch): | Regional science and urban economics |
Verlag: | Elsevier |
Verlagsort: | Amsterdam |
Publikationstyp: | Wissenschaftlicher Artikel |
Sprache: | Englisch |
Jahr der Erstveröffentlichung: | 2015 |
Erscheinungsjahr: | 2015 |
Datum der Freischaltung: | 27.03.2017 |
Freies Schlagwort / Tag: | Municipality data; Public debt; Spatial interactions; Spatial panel estimation; Tax and spending competition |
Band: | 53 |
Seitenanzahl: | 18 |
Erste Seite: | 20 |
Letzte Seite: | 37 |
Fördernde Institution: | Fritz Thyssen Foundation [10.12.2.092] |
Organisationseinheiten: | Wirtschafts- und Sozialwissenschaftliche Fakultät / Wirtschaftswissenschaften |
Peer Review: | Referiert |