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Local governments in the wake of demographic change: evidence from German municipalities
[Dezentrale Regierungen im Strudel von demographischen Wandel: Evidenz von deutschen Stadtverwaltungen]

Author

Listed:
  • Geys, Benny
  • Heinemann, Friedrich
  • Kalb, Alexander

Abstract

German municipalities are expected to suffer from intense demographic changes in the upcoming decades; not only in the form of population losses, but also through a changing demographic structure (i.e. less children and adolescents, more elderly, higher dependency ratio, and so on). We assess local governments’ vulnerability to the fiscal consequences of these demographic transformations (using a sample of 1021 municipalities in the state of Baden-Württemberg) by determining the elasticity of local government cost functions to municipalities’ demographic characteristics. Our findings indicate that smaller municipalities are especially vulnerable to increasing cost pressures following most of the currently predicted demographic changes. In the absence of increased higher-level government support (e.g. through the fiscal equalization scheme), these findings would support a case for boundary reviews or more extensive inter-communal cooperation.

Suggested Citation

  • 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).
  • Handle: RePEc:zbw:wzbmpg:spii200819
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    File URL: https://www.econstor.eu/bitstream/10419/51071/1/585602522.pdf
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    References listed on IDEAS

    as
    1. David E. Bloom & David Canning, 2004. "Global demographic change : dimensions and economic significance," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 9-56.
    2. John Ashworth & Benny Geys & Bruno Heyndels, 2005. "Government Weakness and Local Public Debt Development in Flemish Municipalities," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(4), pages 395-422, August.
    3. James Heilbrun, 1992. "Art and Culture as Central Place Functions," Urban Studies, Urban Studies Journal Limited, vol. 29(2), pages 205-215, April.
    4. Philip Andrew Stevens, 2005. "Assessing the Performance of Local Government," National Institute Economic Review, National Institute of Economic and Social Research, vol. 193(1), pages 90-101, July.
    5. Kristien Werck & Bruno Heyndels & Benny Geys, 2008. "The impact of ‘central places’ on spatial spending patterns: evidence from Flemish local government cultural expenditures," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 32(1), pages 35-58, March.
    6. Lawrence H. Summers & Chair, 2004. "General discussion : global demographic change : dimensions and economic significance," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 73-81.
    7. Joel Mokyr, 2004. "Commentary : global demographic change : dimensions and economic significance," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 57-71.
    8. Helmut Seitz & Dirk Freigang & Sören Högel & Gerhard Kempkes, 2007. "Die Auswirkungen der demographischen Veränderungen auf die Budgetstrukturen der öffentlichen Haushalte," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(2), pages 147-164, March.
    9. Tim Callen & Warwick J. McKibbin & Nicoletta Batini, 2006. "The Global Impact of Demographic Change," IMF Working Papers 06/9, International Monetary Fund.
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    Citations

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    Cited by:

    1. Jan Kluge & Gunther Markwardt & Christian Thater, 2015. "Self-preserving Leviathans - Evidence from Regional-level Data," CESifo Working Paper Series 5177, CESifo Group Munich.
    2. Tyrefors Hinnerich, Björn, 2009. "Do merging local governments free ride on their counterparts when facing boundary reform?," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 721-728, June.
    3. Hendrik P. Van Dalen & Kène Henkens, 2011. "Who fears and who welcomes population decline?," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 25(13), pages 437-464, August.
    4. Marie-Noëlle DUQUENNE, 2014. "Le Retour À La Campagne Dans La Grèce En Crise," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 39, pages 205-224.
    5. Christian Bergholz & Ivo Bischoff, 2015. "Citizens‘ preferences for inter-municipal cooperation in rural areas: evidence from a survey in three Hessian counties," MAGKS Papers on Economics 201523, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    6. Hagist, Christian & Vatter, Johannes, 2009. "Measuring fiscal sustainability on the municipal level: A German case study," FZG Discussion Papers 35, University of Freiburg, Research Center for Generational Contracts (FZG).
    7. De Witte, Kristof & Geys, Benny, 2013. "Citizen coproduction and efficient public good provision: Theory and evidence from local public libraries," European Journal of Operational Research, Elsevier, vol. 224(3), pages 592-602.
    8. Cosmin Eugen ENACHE, 2012. "The efficiency of expenditure-related redistributive policies in the European countries," Timisoara Journal of Economics, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 5(18), pages 380-394.
    9. Peter Bönisch & Benny Geys & Claus Michelsen, 2015. "David and Goliath in the Poll Booth: Group Size, Voting Power and Voter Turnout," Discussion Papers of DIW Berlin 1491, DIW Berlin, German Institute for Economic Research.
    10. repec:bla:kyklos:v:70:y:2017:i:4:p:594-621 is not listed on IDEAS
    11. Christian Bergholz & Ivo Bischoff, 2016. "Local council members’ view on inter-municipal cooperation: Does office-related self interest matter?," MAGKS Papers on Economics 201647, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    12. Haug, Peter, 2009. "Shadow Budgets, Fiscal Illusion and Municipal Spending: The Case of Germany," IWH Discussion Papers 9/2009, Halle Institute for Economic Research (IWH).

    More about this item

    Keywords

    Demographic change; local government expenditures; cost elasticity; economies of scale; rolling regression; German municipalities;

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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