2016

Government Consumption Smoothing in a Balanced Budget Regime

Reprint No. 2016:11

Author(s): Lovisa PerssonYear: 2016 Title: International Tax and Public Finance Volume (No.): 23 (2) Pages: 289–315
Online article (restrictions may apply)


I investigate government consumption smoothing (sensitivity) under a balanced budget rule in Swedish municipalities. In general, I find Swedish municipalities to be highly consumption sensitive. Municipalities consume 87.6 % out of predicted current revenues in the time period leading up to the implementation of the balanced budget rule, and they consume 76.3 % out of predicted current revenue in the time period following the implementation. Fiscally weak municipalities are found to be more consumption sensitive than fiscally strong municipalities. Very weak municipalities have become more consumption sensitive compared with very strong municipalities since the implementation of the balanced budget rule. Thus, I find indicative evidence that both credit market constraints and formal budget rules such as balanced budget rules increase municipal consumption sensitivity.


Reference:
Persson, Lovisa (2016), "Government Consumption Smoothing in a Balanced Budget Regime". International Tax and Public Finance 23(2), 289–315.

Lovisa Persson

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Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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