10.17169/FUDOCS_DOCUMENT_000000019495
Fossen, Frank M.
Freier, Ronny
Martin, Thorsten
Race to the debt trap?
Spatial econometric evidence on debt in German municipalities
Freie Universität Berlin
2014
public debt; tax and spending competition; municipality data; spatial interactions; spatial panel estimation
336 Öffentliches Finanzwesen
336 Public finance
ddc:336
Universitätsbibliothek der FU Berlin
Universitätsbibliothek der FU Berlin
Universität <Berlin, Freie Universität> / Fachbereich Wirtschaftswissenschaft
2018-04-10
2014
Buch
http://dspace.ub.fu-berlin.de/handle/fub188/5791
10.17169/FUDOCS_document_000000019495
urn:nbn:de:kobv:188-fudocsdocument000000019495-4
39 S.
Through an intertemporal budget constraint, jurisdictions may gain advantages in tax and spending competition by 'competing' on debt. While the existing spatial econometric literature focuses on tax and spending competition, very little is known about spatial interaction via public debt. This paper estimates the spatial interdependence of public debt among German municipalities using a panel on municipalities in the two largest German states from 1999 to 2006. We find significant and robust interaction effects between debt of neighboring municipalities, which we compare to spatial tax and spending interactions. The results indicate that a municipality increases its per capita debt by 16-33 Euro as a reaction to an increase of 100 Euro in neighboring municipalities.