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Local Governments in the Wake of Demographic Change: Evidence from German Municipalities

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  • Benny Geys
  • Friedrich Heinemann
  • Alexander Kalb

Abstract

German municipalities are expected to suffer from intense demographic changes in the upcoming decades, not only in the form of population losses, but also through a changing demographic structure. We assess local governments' vulnerability to the fiscal consequences of these demographic transformations (using a sample of 1021 German municipalities) by determining the elasticity of local government cost functions to municipalities' demographic characteristics. Our findings indicate that smaller municipalities are especially vulnerable to increasing cost pressures. In the absence of increased higher-level government support, these findings would support a case for boundary reviews or more extensive intercommunal cooperation.

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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 64 (2008)
Issue (Month): 4 (December)
Pages: 434-457

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200812)64:4_434:lgitwo_2.0.tx_2-o

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Keywords: demographic change; cost elasticity; economies of scale; rolling regression; German municipalities;

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References

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  1. David E. Bloom & David Canning, 2005. "Global Demographic Change: Dimensions and Economic Significance," PGDA Working Papers 0105, Program on the Global Demography of Aging.
  2. John Ashworth & Benny Geys & Bruno Heyndels, 2005. "Government Weakness and Local Public Debt Development in Flemish Municipalities," International Tax and Public Finance, Springer, vol. 12(4), pages 395-422, August.
  3. Lawrence H. Summers & Chair, 2004. "General discussion : global demographic change : dimensions and economic significance," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 73-81.
  4. Tim Callen & Warwick J. McKibbin & Nicoletta Batini, 2006. "The Global Impact of Demographic Change," IMF Working Papers 06/9, International Monetary Fund.
  5. Joel Mokyr, 2004. "Commentary : global demographic change : dimensions and economic significance," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 57-71.
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Cited by:
  1. Tyrefors Hinnerich, Björn, 2009. "Do merging local governments free ride on their counterparts when facing boundary reform?," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 721-728, June.
  2. Cosmin Eugen ENACHE, 2012. "The efficiency of expenditure-related redistributive policies in the European countries," Timisoara Journal of Economics, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 5(18), pages 380-394.
  3. Hendrik P. Van Dalen & Kène Henkens, 2011. "Who fears and who welcomes population decline?," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 25(13), pages 437-464, August.
  4. De Witte, Kristof & Geys, Benny, 2012. "Citizen coproduction and efficient public good provision: Theory and evidence from local public libraries," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" SP II 2012-108, Social Science Research Center Berlin (WZB).
  5. Hagist, Christian & Vatter, Johannes, 2009. "Measuring fiscal sustainability on the municipal level: A German case study," FZG Discussion Papers 35, Research Center for Generational Contracts (FZG), University of Freiburg.

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