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.
Fiscal and Economic Effects of Local Austerity
Institut der deutschen Wirtschaft (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.
Fiscal and Economic Effects of Local Austerity
Institut der deutschen Wirtschaft (IW)
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The Russian invasion of Ukraine has significantly clouded the economic outlook in Germany and worsened the investment climate. The investment gap created in the wake of the Covid pandemic will not be closed for the time being.
IW
IW-Konjunkturprognose: Investitionsstau bedroht Wohlstand
Die deutsche Wirtschaft hat das Krisenjahr 2022 besser überstanden als zunächst befürchtet. Doch Unsicherheit, Inflation und hohe Energiekosten belasten den Aufschwung: Für 2023 rechnet das Institut der deutschen Wirtschaft (IW) mit einem Wirtschaftswachstum ...
IW