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Determinants of Portuguese local governments’ indebtedness

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Abstract

Using an extensive dataset covering all Portuguese local governments (308), this paper analyzes the determinants of municipal deficits and debt. The results clearly indicate the existence of a political budget cycle, but there is no evidence that fiscal policy is used strategically to condition the decisions of subsequent governments. Furthermore, local governments that enjoy larger support in the town-hall and for which there is party similarity between the mayor and the prime-minister have larger budget balances. Finally, larger shares of investment and of interest payments in expenditures, and higher unemployment rates increase indebtedness, while higher private sector wages, more construction licenses, and greater percentages of the municipal area assigned to urban use are associated with lower indebtedness.

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  • Linda Gonçalves Veiga & Francisco José Veiga, 2014. "Determinants of Portuguese local governments’ indebtedness," NIPE Working Papers 16/2014, NIPE - Universidade do Minho.
    • Handle: RePEc:nip:nipewp:16/2014
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    Cited by:

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    2. Samia OMRANE BELGUITH & Hanen OMRANE, 2017. "Macroeconomic determinants of public debt growth: A case study for Tunisia," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(613), W), pages 161-168, Winter.
    3. Jose M. Cordero & Francisco Pedraja-Chaparro & Elsa C. Pisaflores & Cristina Polo, 2017. "Efficiency assessment of Portuguese municipalities using a conditional nonparametric approach," Journal of Productivity Analysis, Springer, vol. 48(1), pages 1-24, August.
    4. Carrera, Jorge & de la Vega, Pablo, 2021. "The impact of income inequality on public debt," The Journal of Economic Asymmetries, Elsevier, vol. 24(C).
    5. Cordero, José Manuel & Pedraja-Chaparro, Francisco & Pisaflores, Elsa C. & Polo, Cristina, 2016. "Efficiency assessment of Portuguese municipalities using a conditional nonparametric approach," MPRA Paper 70674, University Library of Munich, Germany.

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    More about this item

    Keywords

    public debt; budget deficits; local governments; Portugal;
    All these keywords.

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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