Shadow Budgets, Fiscal Illusion and Municipal Spending: The Case of Germany
The paper investigates the existence of fiscal illusion in German municipalities with special focus on the revenues from local public enterprises. These shadow budgets tend to increase the misperception of municipal tax prices and seem to have been neglected in the literature. Therefore, an aggregated expenditure function has been estimated for all German independent cities applying an "integrated budget" approach, which means that revenues and expenditures of the core budget and the local public enterprises are combined to one single municipal budget. The estimation results suggest that a higher relative share of local public enterprise revenues might increase total per capita spending as well as spending for nonobligatory municipal goods and services. Empirical evidence for other sources of fiscal illusion is mixed but some indications for debt illusion, renter illusion or the flypaper effect could be found.
|Date of creation:||2009|
|Contact details of provider:|| Postal: Kleine Märkerstrasse 8, 06108 Halle (Saale)|
Phone: (0345) 7753-60
Fax: (0345) 7753-820
Web page: http://www.iwh-halle.de/
More information through EDIRC
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.:
- Bergstrom, Theodore C & Goodman, Robert P, 1973. "Private Demands for Public Goods," American Economic Review, American Economic Association, vol. 63(3), pages 280-296, June.
- Borcherding, Thomas E & Deacon, Robert T, 1972. "The Demand for the Services of Non-Federal Governments," American Economic Review, American Economic Association, vol. 62(5), pages 891-901, December.
- Thomas DiLorenzo, 1982. "Utility profits, fiscal illusion, and local public expenditures," Public Choice, Springer, vol. 38(3), pages 243-252, January.
- Rebecca J. Campbell, 2004. "Leviathan and Fiscal Illusion in Local Government Overlapping Jurisdictions," Public Choice, Springer, vol. 120(3_4), pages 301-329, September.
- Dollery, Brian E & Worthington, Andrew C, 1996. " The Empirical Analysis of Fiscal Illusion," Journal of Economic Surveys, Wiley Blackwell, vol. 10(3), pages 261-297, September.
- Dollery, Brian & Worthington, Andrew, 1999. "Fiscal Illusion at the Local Level: An Empirical Test Using Australian Municipal Data," The Economic Record, The Economic Society of Australia, vol. 75(228), pages 37-48, March.
- Kevin Deno & Stephen Mehay, 1988. "Municipal utilities and local public finance: A simultaneous model," Public Choice, Springer, vol. 57(3), pages 201-212, June.
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(2), pages 269-304, June.
- Richard Wagner, 1976. "Revenue structure, fiscal illusion, and budgetary choice," Public Choice, Springer, vol. 25(1), pages 45-61, March.
- Benny Geys & Friedrich Heinemann & Alexander Kalb, 2008.
"Local Governments in the Wake of Demographic Change: Evidence from German Municipalities,"
FinanzArchiv: Public Finance Analysis,
Mohr Siebeck, Tübingen, vol. 64(4), pages 434-457, December.
- Geys, Benny & Heinemann, Friedrich & Kalb, Alexander, 2008.
"Local governments in the wake of demographic change: evidence from German municipalities
[Dezentrale Regierungen im Strudel von demographischen Wandel: Evidenz von deutschen Stadtverwaltungen]," Discussion Papers, Research Unit: Market Processes and Governance SP II 2008-19, Social Science Research Center Berlin (WZB).
- Kalb, Alexander, 2008. "The Impact of Intergovernmental Grants on Cost Efficiency: Theory and Evidence from German Municipalities," ZEW Discussion Papers 08-051, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Geoffrey K. Turnbull, 2007. "Government Form and Performance: Fiscal Illusion and Administrative Ability In U.S. Counties," Southern Economic Journal, Southern Economic Association, vol. 73(3), pages 754-769, January.
- Rupert Sausgruber & Jean-Robert Tyran, 2005. "Testing the Mill hypothesis of fiscal illusion," Public Choice, Springer, vol. 122(1), pages 39-68, January.
- Wildasin, David E., 1989. "Demand estimation for public goods : Distortionary taxation and other sources of bias," Regional Science and Urban Economics, Elsevier, vol. 19(3), pages 353-379, August.
- WILDASIN, David E., "undated". "Demand estimation for public goods. Distortionary taxation and other sources of bias," CORE Discussion Papers RP 855, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Aronsson, Thomas & Wikstrom, Magnus, 1996. "Local public expenditure in Sweden a model where the median voter is not necessarily decisive," European Economic Review, Elsevier, vol. 40(9), pages 1705-1716, December.
- Deborah Fletcher & Lawrence W. Kenny, 2008. "The Influence of the Elderly on School Spending in a Median Voter Framework," Education Finance and Policy, MIT Press, vol. 3(3), pages 283-315, July.
- Epple, Dennis & Romano, Richard E., 1996. "Ends against the middle: Determining public service provision when there are private alternatives," Journal of Public Economics, Elsevier, vol. 62(3), pages 297-325, November.
- Wyckoff, Paul Gary, 1990. "The Simple Analytics of Slack-Maximizing Bureaucracy," Public Choice, Springer, vol. 67(1), pages 35-47, October.
- Charles H. Breeden & William J. Hunter, 1985. "Tax Revenue and Tax Structure," Public Finance Review, , vol. 13(2), pages 216-224, April.
- Pommerehne, Werner W & Schneider, Friedrich, 1978. "Fiscal Illusion, Political Institutions, and Local Public Spending," Kyklos, Wiley Blackwell, vol. 31(3), pages 381-408.
- Walter Misiolek & Harold Elder, 1988. "Tax structure and the size of government: An empirical analysis of the fiscal illusion and fiscal stress arguments," Public Choice, Springer, vol. 57(3), pages 233-245, June.
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:zbw:iwhdps:iwh-9-09. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.
- Geys, Benny & Heinemann, Friedrich & Kalb, Alexander, 2008. "Local governments in the wake of demographic change: evidence from German municipalities