Urban sprawl and municipal budgets in Spain: a dynamic panel data analysis
Urban sprawl has recently become a matter of concern throughout Europe, but it is in southern countries where its environmental and economic impact has been most severe. This low-density, spatially expansive urban development pattern can have a highly marked impact on municipal budgets. Thus, local governments may see sprawl as a potential source of finance, in terms of building-associated revenues and increased transfers from upper tiers of government. At the same time, sprawl leads to increased levels of expenditure, as it may raise the provision costs of certain local public goods and requires greater investment in extending basic infrastructure for new urban development. What, therefore, is the net fiscal impact of urban sprawl? Do local governments consider the long-run net fiscal impact of new urban growth or do they simply focus on its short-term benefits, ignoring future development costs? This paper addresses these questions by analysing the dynamic relationship between urban sprawl and local budget variables. To do so, we estimate a panel vector autoregressive model using data for 4,000 Spanish municipalities for the period 1994-2005. Computed Generalised Impulse Response Functions show: (i) that sprawl considerably increases demand for new infrastructure, (ii) that the capital deficit generated by this new infrastructure is covered in the main by intergovernmental transfers and, to a lesser extent, by revenues linked to the real estate cycle, and (iii) that sprawl leads to a short-term current surplus, as the increase in current revenues offsets the increase in current expenditures due to public service provision for new developments. Overall, these findings point to a moral hazard problem for local governments in which inordinate intergovernmental transfers and development revenues encourage excessive urban sprawl.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 93 403 46 46
Fax: 93 403 98 32
Web page: http://www.ieb.ub.edu
More information through EDIRC
References listed on IDEAS
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.:
- Albert Solé-Ollé & Miriam Hortas Rico, 2008.
"Does urban sprawl increase the costs of providing local public services? Evidence from Spanish municipalities,"
2008/6, Institut d'Economia de Barcelona (IEB).
- Miriam Hortas-Rico & Albert SolÃ©-OllÃ©, 2010. "Does Urban Sprawl Increase the Costs of Providing Local Public Services? Evidence from Spanish Municipalities," Urban Studies, Urban Studies Journal Limited, vol. 47(7), pages 1513-1540, June.
- Albert Solé-Ollé & Miriam Hortas-Rico, 2008. "Does urban sprawl increase the costs of providing local public services? Evidence from Spanish municipalities," Working Papers XREAP2008-10, Xarxa de Referència en Economia Aplicada (XREAP), revised Nov 2008.
When requesting a correction, please mention this item's handle: RePEc:ieb:wpaper:2010/10/doc2010-43. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.