Causes and consequences of fiscal stress in Michigan cities
AbstractAs the world economy emerges from the real estate and financial crises, economists and policymakers are considering the implications for government finance. One facet of the recession is the precipitous fall in housing values that is expected to have long-lasting effects on local government finance. Throughout the United States and Europe, local officials have not experienced challenges of this magnitude in generations. How might we expect local government finances to respond/evolve in the wake of the crisis? We gain insight on this question by studying city finance in a state that has struggled for years. In particular, many Michigan cities have experienced significant and ongoing fiscal challenges for at least a decade and acute crisis over the last several years. We examine how expenditure patterns have changed in response to these challenges. Using data for most cities in Michigan for years 2005 through 2009, we find that expenditures in the General Government, Public Works, and Parks and Recreation categories were responsive to fiscal stress, and Capital Expenditures have been particularly vulnerable. However, expenditures in essential services such as Public Safety were generally not adversely affected. Our research offers insights regarding the likely implications of the real estate crisis for cities in the United States as well as in Europe that have, until very recently, enjoyed relative economic prosperity and limited fiscal challenges.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Regional Science and Urban Economics.
Volume (Year): 41 (2011)
Issue (Month): 4 (July)
Contact details of provider:
Web page: http://www.elsevier.com/locate/regec
Local government Fiscal stress Michigan Real estate crisis;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bergstrom, Theodore C & Goodman, Robert P, 1973. "Private Demands for Public Goods," American Economic Review, American Economic Association, vol. 63(3), pages 280-96, June.
- Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004.
"How Much Should We Trust Differences-in-Differences Estimates?,"
The Quarterly Journal of Economics,
MIT Press, vol. 119(1), pages 249-275, February.
- Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
- James M. Poterba, 1995.
"State Responses to Fiscal Crisis: The Effects of Budgetary Institutionsand Politics,"
NBER Working Papers
4375, National Bureau of Economic Research, Inc.
- Poterba, James M, 1994. "State Responses to Fiscal Crises: The Effects of Budgetary Institutions and Politics," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 799-821, August.
- Albert Solé-Ollé & Elisabet Viladecans-Marsal, 2011. "Local spending and the housing boom," Working Papers 2011/27, Institut d'Economia de Barcelona (IEB).
- Razvan Vlaicu & Alexander Whalley, 2011. "Do housing bubbles generate fiscal bubbles?," Public Choice, Springer, vol. 149(1), pages 89-108, October.
- Chernick, Howard & Langley, Adam & Reschovsky, Andrew, 2011. "The impact of the Great Recession and the housing crisis on the financing of America's largest cities," Regional Science and Urban Economics, Elsevier, vol. 41(4), pages 372-381, July.
- Bo Zhao & David Coyne, 2011. "Designing formulas for distributing reductions in state aid," New England Public Policy Center Working Paper 11-2, Federal Reserve Bank of Boston.
- Alm, James & Buschman, Robert D. & Sjoquist, David L., 2011.
"Rethinking local government reliance on the property tax,"
Regional Science and Urban Economics,
Elsevier, vol. 41(4), pages 320-331, July.
- James Alm & Robert D. Buschman & David L. Sjoquist, 2012. "Rethinking Local Government Reliance on the Property Tax," Working Papers 1215, Tulane University, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.