Data and Code for: The Dynamic Response of Municipal Budgets to Revenue Shocks

Principal Investigator(s): View help for Principal Investigator(s) Ines Helm, LMU Munich; Jan Stuhler, Universidad Carlos III de Madrid

Version: View help for Version V1

Name	File Type	Size	Last Modified
BW			12/22/2023 08:57:AM
BY			12/22/2023 08:56:AM
Bartik			12/22/2023 08:45:AM
CPI			12/22/2023 09:02:AM
Distances			12/22/2023 09:56:AM
Einwohnerveredelung			12/22/2023 09:01:AM
HE			12/22/2023 10:34:AM
Migr_shock_east			12/22/2023 10:54:AM
NI			12/22/2023 11:03:AM
NRW			12/22/2023 11:11:AM

Project Description

Summary: We study the fiscal and tax response to intergovernmental grants, exploiting quasi-experimental variation within Germany’s fiscal equalization scheme triggered by Census revisions of population counts. Municipal budgets do not adjust instantly. Instead, spending and investments adapt within five years to revenue gains, while the adjustment to losses is more rapid. Yet, the long-run response is symmetric. The tax response is particularly slow, stretching over more than a decade. Well-known empirical “anomalies” such as the so-called flypaper effect may thus reflect a short-run phenomenon, while long-run fiscal behavior appears more consistent with standard theories of fiscal federalism.

Scope of Project

Subject Terms: fiscal federalism; intergovernmental grants; fiscal equalization; government spending; local taxation; census shock; flypaper effect

JEL Classification:
      E62 Fiscal Policy
      H71 State and Local Taxation, Subsidies, and Revenue
      H72 State and Local Budget and Expenditures
      H77 Intergovernmental Relations; Federalism; Secession

Geographic Coverage: Germany

Universe: municipalities in Bavaria, Baden-Wuerttemberg, Hessia, North-Rhine Westphalia, Lower Saxony

Data Type(s): administrative records data; aggregate data

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Published Versions

V1 [2024-08-29]

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