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Spatial interactions in local public debt. Evidence from Poland

Author

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  • Banaszewska Monika

    (1 Department of Public Finance, Institute of Finance, Poznań University of Economics and Business, al. Niepodległości 10, 61-875, Poznań, Poland)

Abstract

The aim of the paper is to investigate spatial interactions among the debt of 2,442 municipalities in Poland over the period 2005–2020. Using the dynamic spatial Durbin model with two-way fixed effects, it provides empirical evidence of positive spatial interactions. It is estimated that an increase in debt per capita in a given municipality by PLN 100 is related to an increase in the debt per capita in neighbouring municipalities by PLN 8–10. The result is robust to the various specifications of spatial weight matrix (contiguity vs. inverse-distance with a cut-off). It is also found that municipal debt in Poland suffers from high persistence over time. Keywords: municipalities, dynamic spatial Durbin model, debt persistence.

Suggested Citation

  • Banaszewska Monika, 2023. "Spatial interactions in local public debt. Evidence from Poland," Economics and Business Review, Sciendo, vol. 9(3), pages 206-223, October.
    • Handle: RePEc:vrs:ecobur:v:9:y:2023:i:3:p:206-223:n:7
    DOI: 10.18559/ebr.2023.3.751
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    References listed on IDEAS

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    1. David R. Agrawal & William H. Hoyt & John D. Wilson, 2022. "Local Policy Choice: Theory and Empirics," Journal of Economic Literature, American Economic Association, vol. 60(4), pages 1378-1455, December.
    2. J. Kornai & E. Maskin & G. Roland, 2004. "Understanding the Soft Budget Constraint," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 11.
    3. Massimiliano Ferraresi & Giuseppe Migali & Leonzio Rizzo, 2018. "Spillover effects in local public spending," Regional Studies, Taylor & Francis Journals, vol. 52(11), pages 1570-1584, November.
    4. David R. Agrawal, 2015. "The Tax Gradient: Spatial Aspects of Fiscal Competition," American Economic Journal: Economic Policy, American Economic Association, vol. 7(2), pages 1-29, May.
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    More about this item

    Keywords

    municipalities; dynamic spatial Durbin model; debt persistence;
    All these keywords.

    JEL classification:

    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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