Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/149560
Authors: 
Roesel, Felix
Year of Publication: 
2017
Series/Report no.: 
CEPIE Working Paper 02/17
Abstract: 
In many federal countries, local governments run large deficits, even when fiscal supervision by state authorities is tight. I investigate to which extent party alignment of governments and fiscal supervisors influences budget deficits. The dataset includes 427 German local governments for the period 2000-2004. I exploit a period after a far-reaching institutional reform that entirely re-distributed political powers on both the government level and the fiscal supervisor level. Results do not show that party alignments of governments and supervisors (co-partisanship) drive short-term deficits. Instead, I find that the ideology of partisan governments and supervisors matters: left-wing local governments run higher deficits than their right-wing counterparts; left-wing supervisors tolerate higher deficits than right-wing supervisors. These findings imply that political independence for fiscal supervisors is recommended.
Subjects: 
Local government
Budget deficits
Fiscal supervision
Partisan cycle
JEL: 
H62
H74
H77
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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