Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/263730 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9800
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
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.
Subjects: 
austerity
fiscal consolidation
local amenities
taxes
spatial equilibrium
JEL: 
H74
H73
H11
H30
Document Type: 
Working Paper
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