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On the determinants of local government debt: Does one size fit all?

  • Maria Teresa Balaguer-Coll


    (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain)

  • Diego Prior


    (Department of Business, Universitat Autònoma de Barcelona, Spain & IESEG School of Management, Lille, France)

  • Emili Tortosa-Ausina


    (Department of Economics, Universitat Jaume I, Castellón, Spain)

This paper analyzes the factors that directly influence levels of debt in Spanish local governments. Specifically, the main objective is to find out the extent to which indebtedness is originated by controllable factors that public managers can influence, or whether it hinges on other variables beyond managers’ control. The importance of this issue has intensified since the start of the crisis in 2007, due to the abrupt decline of revenues and, simultaneously, to the stagnation (or even increase) in the levels of costs facing these institutions face. Results can be explored from multiple perspectives, given that the set of explanatory factors is also multiple. However, the most interesting result relates to the varying effect of each covariate depending on each municipality’s specific debt level, which suggests that economic policy recommendations should not be homogeneous across local governments.

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Paper provided by Economics Department, Universitat Jaume I, Castellón (Spain) in its series Working Papers with number 2013/16.

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Length: 29 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:jau:wpaper:2013/16
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  1. Per Pettersson-Lidbom, 2001. "An Empirical Investigation of the Strategic Use of Debt," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 570-583, June.
  2. Kiewiet, D Roderick & Szakaly, Kristin, 1996. "Constitutional Limitations on Borrowing: An Analysis of State Bonded Indebtedness," Journal of Law, Economics and Organization, Oxford University Press, vol. 12(1), pages 62-97, April.
  3. Andy Pike & Andrés Rodríguez-Pose & John Tomaney & Gianpiero Torrisi & Vassilis Tselios, 2010. "In Search of the 'Economic Dividend' of Devolution: Spatial Disparities, Spatial Economic Policy and Decentralisation in the UK," SERC Discussion Papers 0062, Spatial Economics Research Centre, LSE.
  4. Blais, Andre & Nadeau, Richard, 1992. " The Electoral Budget Cycle," Public Choice, Springer, vol. 74(4), pages 389-403, December.
  5. Albert Solé-Ollé & Miriam Hortas Rico, 2008. "Does urban sprawl increase the costs of providing local public services? Evidence from Spanish municipalities," Working Papers 2008/6, Institut d'Economia de Barcelona (IEB).
  6. Ignacio Lago-Pe�as & Santiago Lago-Pe�as & Jorge Martinez-Vazquez, 2011. "The political and economic consequences of decentralization," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 29(2), pages 197-203, April.
  7. Fermín Cabasés & Pedro Pascual & Jaime Vallés, 2007. "The effectiveness of institutional borrowing restrictions: Empirical evidence from Spanish municipalities," Public Choice, Springer, vol. 131(3), pages 293-313, June.
  8. Roger Koenker & Kevin F. Hallock, 2001. "Quantile Regression," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 143-156, Fall.
  9. Maria Teresa Balaguer-Coll & Diego Prior & Emili Tortosa-Ausina, . "Devolution Dynamics of Spanish Local Government," Working Paper 201001, Department of Business Economics, Universitat Autonoma de Barcelona.
  10. Galli, Emma & Rossi, Stefania P S, 2002. " Political Budget Cycles: The Case of the Western German Lander," Public Choice, Springer, vol. 110(3-4), pages 283-303, March.
  11. Bunch, Beverly S, 1991. " The Effect of Constitutional Debt Limits on Stage Governments' Use of Public Authorities," Public Choice, Springer, vol. 68(1-3), pages 57-69, January.
  12. Dickson, Vaughan & Yu, Weiqiu, 1997. "Spending by Canadian Provincial Governments: An Empirical Analysis," Public Finance = Finances publiques, , vol. 52(2), pages 145-60.
  13. Moshe Buchinsky, 1998. "Recent Advances in Quantile Regression Models: A Practical Guideline for Empirical Research," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 88-126.
  14. Maria Balaguer-Coll & Diego Prior & Emili Tortosa-Ausina, 2013. "Output complexity, environmental conditions, and the efficiency of municipalities," Journal of Productivity Analysis, Springer, vol. 39(3), pages 303-324, June.
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