Nuremberg Research Seminar in Economics on 3 July 2024, LG 0.423
You are invited to join the weekly Nuremberg Research Seminar in Economics on 3 July 2024, from 13.15 to 14.45 pm. The seminar will be held in room LG 0.423. Andreas Lichter (University of Düsseldorf) will be talking about „Strategies and Consequences of Local Fiscal Consolidation: Evidence from Germany”.
More information can be found here:
This paper investigates the consequences of a large-scale fiscal consolidation policy in Germany that considerably tightened municipalities’ budget constraints. Identification relies on a difference-in-differences approach exploiting political discretion in the policy’s assignment rule. We uncover notable heterogeneity in local consolidation strategies by population size—likely due to varying agglomeration rents. Smaller municipalities predominately burdened residents via tax increases and cuts in services, whereas larger ones put part of the burden on firms. Smaller municipalities experienced sizable declines in population levels and house prices, as well as electoral backlash. We find no adverse effects of the policy on the local economy.