The Public Sector
TU Wien Bibliothek
The Public Sector
TU Wien Bibliothek

Journal Article

Title Sustainability of municipal public debt: An Austrian case study of sub-national debt management
Author Bröthaler, Johann ; Getzner, Michael & Haber, Gottfried
Published on 31 Dec 2012
Published by Technische Universität Wien
Published in Volume 38 • Issue 4 • 2012 , pages 19-32
AC AC11360322
DOI 10.34749/oes.2012.64
URN urn:nbn:at:at-ubtuw:4-64

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Abstract (English)

Austrian municipalities face manifold challenges regarding the sustainability of their budgetary policies, especially concerning public debt. On the one hand, municipalities are closely monitored and supervised by upper-level governments. Local borrowing is confined to pre-defined cases with respect to extra-ordinary expenditure. On the other hand, municipal discretion over expenditure and revenue is limited. In the current paper, we test whether municipalities budgetary policies were sustainable in the sense of Bohns (1998) sustainability test. We find that the debt limits were quite effective resulting in stationary debt levels, and in significant and sufficient reactions of the municipal primary surplus to increases in public debt. However, in order to achieve such sustainable policies, municipalities have widely cut investments in local infrastructure. From a long-term perspective, such development is problematic with respect to the quality of available vital infrastructure

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