Assist or desist? Conditional bailouts and fiscal discipline in local governments
(2015) In European Journal of Political Economy 38. p.153-168- Abstract
- Central government bailouts of local governments are commonly viewed as a recipe for local fiscal indiscipline, as local governments learn that the center will come to the rescue in times of trouble. However, little is known about the consequences of bailouts granted conditional on local governments first making efforts to improve the situation. We examine a case in which the Swedish central government provided conditional grants to 36 financially troubled municipalities. We use the synthetic control method to identify suitable comparison units for each of the 36 municipalities. To compare the development of costs and the fiscal surplus of admitted municipalities to that of their most similar counterparts during the decade after the... (More)
- Central government bailouts of local governments are commonly viewed as a recipe for local fiscal indiscipline, as local governments learn that the center will come to the rescue in times of trouble. However, little is known about the consequences of bailouts granted conditional on local governments first making efforts to improve the situation. We examine a case in which the Swedish central government provided conditional grants to 36 financially troubled municipalities. We use the synthetic control method to identify suitable comparison units for each of the 36 municipalities. To compare the development of costs and the fiscal surplus of admitted municipalities to that of their most similar counterparts during the decade after the program, we then estimate fixed effects regressions on the resulting sample. The analysis suggests that conditional bailouts did not erode, and may even have improved, fiscal discipline. (C) 2015 Elsevier B.V. All rights reserved. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/7612551
- author
- Dietrichson, Jens and Ellegård, Lina Maria LU
- organization
- publishing date
- 2015
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- Bailouts, Local governments, Fiscal discipline, Synthetic control method
- in
- European Journal of Political Economy
- volume
- 38
- pages
- 153 - 168
- publisher
- Tranfer Verlag, Regensburg, FRG
- external identifiers
-
- wos:000355373700011
- scopus:84924234704
- ISSN
- 0176-2680
- DOI
- 10.1016/j.ejpoleco.2015.02.004
- language
- English
- LU publication?
- yes
- id
- 72b163d8-508b-4e5f-954f-e160cb92ce9b (old id 7612551)
- date added to LUP
- 2016-04-01 10:26:52
- date last changed
- 2022-03-12 05:45:55
@article{72b163d8-508b-4e5f-954f-e160cb92ce9b,
abstract = {{Central government bailouts of local governments are commonly viewed as a recipe for local fiscal indiscipline, as local governments learn that the center will come to the rescue in times of trouble. However, little is known about the consequences of bailouts granted conditional on local governments first making efforts to improve the situation. We examine a case in which the Swedish central government provided conditional grants to 36 financially troubled municipalities. We use the synthetic control method to identify suitable comparison units for each of the 36 municipalities. To compare the development of costs and the fiscal surplus of admitted municipalities to that of their most similar counterparts during the decade after the program, we then estimate fixed effects regressions on the resulting sample. The analysis suggests that conditional bailouts did not erode, and may even have improved, fiscal discipline. (C) 2015 Elsevier B.V. All rights reserved.}},
author = {{Dietrichson, Jens and Ellegård, Lina Maria}},
issn = {{0176-2680}},
keywords = {{Bailouts; Local governments; Fiscal discipline; Synthetic control method}},
language = {{eng}},
pages = {{153--168}},
publisher = {{Tranfer Verlag, Regensburg, FRG}},
series = {{European Journal of Political Economy}},
title = {{Assist or desist? Conditional bailouts and fiscal discipline in local governments}},
url = {{http://dx.doi.org/10.1016/j.ejpoleco.2015.02.004}},
doi = {{10.1016/j.ejpoleco.2015.02.004}},
volume = {{38}},
year = {{2015}},
}