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Melinda Fremerey / Andreas Lichter / Max Löffler in CESifo Working Papers External Publication 20. June 2022 Fiscal and Economic Effects of Local Austerity

We study the consequences of a large-scale austerity program targeting financially-constrained municipalities in Germany. For identification, we exploit the quasi-random assignment of treatment among equally-distressed municipalities using a difference-in-differences design.

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Fiscal and Economic Effects of Local Austerity
Melinda Fremerey / Andreas Lichter / Max Löffler in CESifo Working Papers External Publication 20. June 2022

Fiscal and Economic Effects of Local Austerity

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German Economic Institute (IW) German Economic Institute (IW)

We study the consequences of a large-scale austerity program targeting financially-constrained municipalities in Germany. For identification, we exploit the quasi-random assignment of treatment among equally-distressed municipalities using a difference-in-differences design.

The policy helped targeted municipalities to consolidate budgets. Whereas the amount of fiscal consolidation was homogeneous among treated municipalities, strategies of consolidation differed between smaller and larger municipalities. The former primarily cut spending on local public services, whereas the latter predominantly relied on tax increases. We detect no adverse economic effects but sizable negative effects on population levels and house prices in municipalities reducing local amenities.

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Fiscal and Economic Effects of Local Austerity
Melinda Fremerey / Andreas Lichter / Max Löffler in CESifo Working Papers External Publication 20. June 2022

Fiscal and Economic Effects of Local Austerity

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German Economic Institute (IW) German Economic Institute (IW)

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The Productivity Effects of Capital Formation in Germany
Michael Grömling IW-Trends No. 2 9. May 2022

The Productivity Effects of Capital Formation in Germany

Despite broad-based digitalisation, productivity advances in Germany in recent years have been considerably lower than in previous decades. This paper conducts a growth accounting which points to steeply declining stimuli from technical progress and especially ...

IW

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Jürgen Matthes IW-Policy Paper No. 1 25. February 2022

Stability instead of government overreach

Contrary to what the German government seems to be aiming for, a reform of the Stability and Growth Pact (SGP) is necessary. The debt reduction rule forces highly indebted euro countries to reduce their debt too quickly and too damagingly for growth.

IW

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