Municipal Enterprises as Shadow Budgets – How do they Affect the Actual Budgetary Situation of Germany´s Local Governments?
Peter Haug
Wirtschaft im Wandel,
No. 5,
2009
Abstract
Outsourcing of municipal tasks from the core budget to municipal enterprises tends to distort the perception of the actual financial position, net assets and results of operations of the German local governments. Excess supply or -demand of/for local public services might be possible consequences of this development. Hence, this article attempts to develop a more comprehensive picture of the municipal budgetary position by a simultaneous analysis of selected indicators. Furthermore, the methodological problems of the calculations are illustrated.
If these shadow budgets are taken into account, the total per capita revenues, -investments and -debts will increase by approximately one third to 50%. However, the share of the municipal employees belonging to the core administration in the total number of municipal employees is 75%. Although only about 22% of the expenditures for certain voluntary municipal tasks have been outsourced, there seems to be an upward trend.
The study also indicates that there are significant differences between Eastern and Western German cities. These include the higher revenues from municipal enterprises, the higher debts per capita and the higher expenditures on culture, sports, leisure services or the promotion of science in Eastern Germany.
The results should be interpreted carefully due to some shortcomings of the official statistics. For example, internal cash flows cannot be totally eliminated. Moreover, indirect municipal majority holdings as well as the municipal savings banks are not included in the results.
All in all, it remains to be seen whether the initiated reforms concerning the introduction of double-entry accounting into the local government budgeting system will help to achieve the ideal goal of a meaningful “consolidated financial statement” for the “city company”.
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Shadow Budgets, Fiscal Illusion and Municipal Spending: The Case of Germany
Peter Haug
IWH Discussion Papers,
No. 9,
2009
Abstract
The paper investigates the existence of fiscal illusion in German municipalities with special focus on the revenues from local public enterprises. These shadow budgets tend to increase the misperception of municipal tax prices and seem to have been neglected in the literature. Therefore, an aggregated expenditure function has been estimated for all German independent cities applying an “integrated budget” approach, which means
that revenues and expenditures of the core budget and the local public enterprises are combined to one single municipal budget. The estimation results suggest that a higher relative share of local public enterprise revenues might increase total per capita spending as well as spending for non-obligatory municipal goods and services. Empirical evidence for other sources of fiscal illusion is mixed but some indications for debt illusion, renter illusion or the flypaper effect could be found.
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The Ending of Solidarity Pact Payments: Are the “Neue Länder” Prepared Sufficiently?
Katja Wilde, Sabine Freye
Wirtschaft im Wandel,
No. 3,
2009
Abstract
Up to 2019, the “Neue Länder” in Germany are benefitting from financial transfer within the framework of the solidarity pact. From 2005 to 2007, the “Neue Länder” were able to improve they financial situation and used the solidarity pact payments efficiently. However, these payments are decreasing annually. This implies a significant financial reduction to the “Neue Länder’s” overall budgets and a considerable challenge for their future investments. This article analyses publications by the governments of the “Neue Länder” about their medium term budget planning and related progress reports from the year 2006. The consolidation of their budgets seems to be an essential aspect in the policy strategy of “Neue Länder” due to limited tax autonomy and legal restrictions on their expenditures. However, we identified several consolidation strategies with regard to infrastructural priorities, restructuring of administration, and creation of reserves. The public revenues of the “Neue Länder” are expected to decline in 2009 due to the current recession. In case that there are no fundamental changes in the underlying economic structures, the financial scope of the “Neue Länder” is going to be increasingly constrained, in particular with regard to future investments.
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Suburban Municipalities on Trial – Analysing the Sustainability of Socioeconomic Structures at the Example of the Municipality Schkopau
Sabine Döhler, Alexander Kubis
Wirtschaft im Wandel,
No. 7,
2008
Abstract
This article analyses socio-economic criteria of municipalities next to large cities. In a case study, we examine the municipality Schkopau in the south of Saxony-Anhalt. We ask if the fusion of smaller communes to this “new” municipality created in 2004 was rational in terms of sustainable socio-economic structures. Hence, we use the criteria of satellite towns developed by Boustedt.
We show that the criterion of political independence is assured by law. Meanwhile, the criteria independence of culture and urban development are not completely fulfilled. Due to the high density of industrial enterprises, the municipality has high tax revenue and therefore a strong financial basis. Also, the criterion of the minimum population figure is implemented.
Based on the specific results of the satellite town criteria, we could not find definite results for the municipality Schkopau, they are rather ambivalent. This result is partly caused by the strong interactions within the functional area of the provinces Saxony, Saxony-Anhalt and Thuringia. Due to the high dynamic of the structural change, we also point out the necessity to enhance the criteria for sustainable socio-economic structures of local and regional municipalities.
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Oil Prices and International Trade: How Petrodollar Recycling Affects the Industrialised Countries
Götz Zeddies
Wirtschaft im Wandel,
No. 4,
2008
Abstract
Since 2004, prices for crude oil nearly tripled at international commodity markets. In the wake of the oil crises of the 1970s and ‘80s, numerous empirical studies analysing the macroeconomic effects of sharp increases in commodity prices were carried out pointing at the risks of oil price rises for GDP growth in oil-importing countries. However, in most of these analyses, the impact of oil price increases on international trade of oil-importing countries, which gained in importance in the course of globalisation, is considered only marginally. This is especially the case for the additional revenues of oil-exporting countries spent in large parts for imports from and investment in the industrialised economies.
The present article examines the impact of oil price increases on merchandise exports and imports of single oil-importing industrialised countries. The results show that the curbing effects on merchandise exports are lower than on imports. Whereas import demand responds disproportionally high on the decline in consumption and investment in consequence of oil price increases, the effects on merchandise exports are ambivalent. On the one hand, exports to oil-importing trading partner countries decline due to the local economic downturns, but on the other, exports to oil-exporting countries sharply increase. As a consequence, the negative impact of rising oil prices on macroeconomic activity in oil-importing countries is lowered by the external sector due to growing net exports.
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Can Art Finance itself?
Sören Eisenbeiß, Niels Krap, Tobias Glufke
Wirtschaft im Wandel,
No. 3,
2008
Abstract
Until 2003, public savings in the art sector have been immense. But lately there has been a tendency of increasing public expenditures in this field. Nevertheless one has to ask if these allowances are required to sustain artistic and cultural life.
If, however, art cannot be financed by the contributions of their consumers, the question arises whether and to which extend the government should pay for it. In spring 2007, we realized a survey in cooperation with the “neue theater“ in Halle and the “Anhaltisches Theater Dessau“. Among other subjects, we asked the audience to evaluate the current ticket prices. As a result, we analyzed how these theatres could adjust their ticket prices in order to reduce the need of public subsidies. The conclusion of this survey is that the visitors are reacting rather weakly to moderate price increases. So it can be stated that the theatres could in fact boost their revenues by appropriately raising their ticket prices. Unfortunately, the resulting extra revenue is not sufficient to finance the performing arts without the help of public subsidies.
Finally, an additional argument for subsidizing art is that not only the customers benefit from it, but also the society as a whole because of so-called positive external effects.
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On the Economics of Ex-Post Transfers in a Federal State: A Mechanism Design Approach
Martin Altemeyer-Bartscher, T. Kuhn
WWDP, 95,
No. 95,
2008
Abstract
As a common feature in many federal states grants-in aid are payed to jurisdictions ex post, i.e. after local policy measures have chosen. We show that the central government cannot offer grants ex ante in a federal states with informational asymmetries as well as inter-temporal commitment problems. Local governments’ incentives to provide public goods are distorted if they rely on federal grants-in-aid offered ex post. Furthermore it becomes obvious that local governments are apt to substitute tax revenue for higher grants-in-aid if relevant local data are unobservable for the central government. To which extend ex post transfers mitigate local governments’ incentives crucially depends on the information structure predominant in the federation.
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Russia: Importance of the Energy Sector for the Economic Growth Remains High
Martina Kämpfe
Wirtschaft im Wandel,
No. 7,
2007
Abstract
In 2006, Russian economic growth was once more driven by surging private consumption and investment. Thanks to the high energy prices, the boom in export revenues continued. Enterprises had increased earnings from oil and other natural resources, and also the government budget had high surpluses. Both led to significantly faster growth of investments. Construction sector and industry benefited from rising investments, but domestic demand of investment and consumption also covered by increased imports. The importance of the energy sector for the economy remains high. But sustainable long-term growth will require even more investment as well as substantial improvements in economic restructuring.
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Steuern auf Grundbesitz - Kann die Besteuerungspraxis in Kanada ein Vorbild für andere Länder sein?
Martin T. W. Rosenfeld
Stärkung der subnationalen Steuerautonomie und intragovernmentale Transfers,
2007
Abstract
The article is evaluating the existing system of Property Taxation in Canada: how efficient is the system in general, and how is the Canadian Property Tax corresponding to the criteria for an efficient local taxation? The fiscal relevance of the Property Tax for Canada's cities is - as compared to other local revenues - much too high. But the Canadian Property Tax shows a lot of positive features. For local policymakers, the system of Property Taxation leads to strong incentives for measures which are able to increase or to stabilize the value of local property. In general, an adoption of some core features of the Canadian system of Property Taxation by European countries could be recommended.
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The East German Cement Cartel: Cartel Efficiency and Policy after Economic Transformation
Ulrich Blum
Eastern Economic Review,
2007
Abstract
In 2003 the German Antitrust Commission (GAC) proved the existence of a cartel in the German cement industry. The German cement producers involved in the case were fined € 661 million for having established quotas to extract additional rents. One of the main centers of this cartel was East Germany, where the East German Cement Combine with its giant facilities had been sold, in the early 1990s, to four large producers by Treuhand in the process of privatizing the economy. Only in respect to in this market did all defendants concede having had a part in forming a cartel.
In this paper, we challenge the argument of excess revenue that the GAC puts forward for the East German market. We argue that legal evidence does not necessarily translate into economic evidence. We show that demand for cement is realized in geographical and, to a more limited extent, in product space. Thus, in the absence of cartels we would expect monopolistic competition to prevail. We argue that any transition in the market regime, from the cartel to the post cartel period, must be traceable in the individual firm’s demand function which differs from the clients’ demand function because of costs for spatial and product differentiation. Within the framework of an econometric model, we cannot identify any structural changes in demand. Most likely, imports from Poland and the Czech Republic were dumped into the East German market and some medium sized producers were responsible for the cartel never working.
Finally the paper shows how difficult it is to generate competition in certain industries even under the umbrella of a well-established market economy, i.e. that of West Germany, and that the openness of the economy, i.e. trans-border shipments, are decisive.
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