TY  - RPRT
        AU  - Helm, Ines
AU  - Stuhler, Jan
        TI  - The Dynamic Response of Municipal Budgets to Revenue Shocks
        PY  - 2021/May/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 14369
        UR  - https://www.iza.org/index.php/publications/dp14369
        AB  - We study the fiscal and tax response to intergovernmental grants, exploiting quasi-experimental variation within Germany's fiscal equalization scheme triggered by Census revisions of official population counts. Municipal budgets do not adjust instantly. Instead, spending and investments adapt within five years to revenue gains, while adjustment to revenue losses is more rapid. Yet, the long-run response is symmetric. The tax response is particularly slow, stretching over more than a decade. Well-known empirical "anomalies" in public finance such as the flypaper effect are thus primarily a short-run phenomenon, while long-run fiscal behavior appears more consistent with standard theories of fiscal federalism.
        KW  - flypaper effect
KW  - local taxation
KW  - government spending
KW  - intergovernmental grants
KW  - fiscal transfers
KW  - Census Shock
        ER  -