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

Fiscal and Economic Effects of Local Austerity

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

Fiscal and Economic Effects of Local Austerity

Melinda Fremerey / Andreas Lichter / Max Löffler in CESifo Working Papers German Economic Institute (IW) German Economic Institute (IW)

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Why Do Companies Invest in Germany?
IW-Trends No. 2 11. July 2026 Hubertus Bardt et al.

Why Do Companies Invest in Germany?

The growth of Germany’s capital stock is slowing, as current investment increasingly fails to keep pacewith steadily rising disposals. In particular, private investment – which accounts for well over fourfifths of total gross fixed capital formation – has been alarmingly low in recent years.

Hubertus Bardt / Michael Grömling / Thomas Schleiermacher / Susanne Seyda IW

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IW-Trends No. 4 24. January 2026 Hubertus Bardt / Michael Grömling

Are the New Federal Government's Measures Having an Effect on Investment in Germany?

With German’s industrial crisis worsening in the wake of the COVID-19 pandemic and recent geopolitical upheavals, a huge investment gap has opened up.

Hubertus Bardt / Michael Grömling IW

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