Fiscal Equalization: The Case of German Municipalities

Finanzausgleich, Kommunaler Finanzausgleich, Deutschland, Fiscal transfer, Local intergovernmental transfer, Germany

Cities in Fiscal Equalization

Redistributive grants schemes, such as fiscal equalization, are a common characteristic of local public finance in several countries. However, large and small jurisdictions are treated differently by the respective fiscal equalization schemes that often tend to favour larger jurisdictions. This paper provides a theoretical analysis showing that efficiency considerations might justify a preferential treatment of large jurisdictions. More specifically, we show that an efficient grant scheme would enable large jurisdictions such as cities to provide more public services. Under some conditions, the resulting budget of cities will exceed that of small towns in per-capita terms. Moreover, in a setting with local capital taxation we find that an efficient equalization scheme would also allow cities to retain a larger share of own funds.revenue sharing, fiscal equalization, agglomeration, tax competition, municipal finance

The impact of numerical expenditure rules on budgetary discipline over the cycle

We study the impact of numerical expenditure rules on the propensity of governments to deviate from expenditure targets in response to surprises in cyclical conditions. Theoretical considerations suggest that due to political fragmentation in the budgetary process expenditure policy might be prone to a pro-cyclical bias. However, this tendency may be mitigated by numerical expenditure rules. These hypotheses are tested against data from a panel of EU Member States. Our key findings are that (i) deviations between actual and planned government expenditure are positively related to unanticipated changes in the output gap, and (ii) numerical expenditure rules reduce this pro-cyclical bias. Moreover, the pro-cyclical spending bias is found to be particularly pronounced for spending items with a high degree of budgetary flexibility. JEL Classification: C23, E62, H50expenditure rules, fiscal discipline, spending bias, stabilisation

Public wages in the euro area - towards securing stability and competitiveness

This paper examines the role of government wages in ensuring macroeconomic stability and competitiveness in the euro area. Recent empirical evidence suggests that government wage expenditure is subject to a pro-cyclical bias in most euro area countries and at the euro area aggregate level. Moreover, the evidence points to a strong positive correlation and co-movement between public and private wages in the short to medium term, both directly and indirectly via the price level, in most euro area countries. In a number of countries this interrelation between public and private wages coincided with strong public wage growth and competitiveness losses. These findings underpin the need for prudent public wage policies supported by strong domestic fiscal frameworks and appropriate wage-setting institutions in order to enhance economic stability and competitiveness in Economic and Monetary Union. JEL Classification: E22, E50competitiveness, fiscal cyclicality, government wage expenditure

Cost of borrowing shocks and fiscal adjustment

Do capital markets impose fiscal discipline? To answer this question, we estimate the fiscal response to a change in the interest rate paid by 14 European governments over four decades in a panel VAR, using sign restrictions to identify structural shocks. A jump in the cost of borrowing leads to an improvement in the primary balance although insufficient to prevent a rise in the debt-to-GDP ratio. Adjustment mainly takes place via rising revenues rather than falling primary expenditures. For EMU countries, the primary balance response was stronger after 1992, when the Maastricht Treaty was signed, suggesting an important interaction between market discipline and fiscal rules.PostprintPeer reviewe

Depression and social isolation during the COVID-19 pandemic in a student population: the effects of establishing and relaxing social restrictions

IntroductionIn a quasi-naturalistic study design, we evaluate the change in psychopathological syndromes and general well-being after the alleviation of social restrictions. The aim of this study was to investigate the specific relationship between social isolation and depressive syndromes.MethodsAt two timepoints, the first during maximal social restrictions, the second after social restrictions had widely ended for 9 months, depressive and other syndromes were measured in an online survey addressing the total cohort of students registered at Heidelberg University, Germany via e-mail (n = 27,162). The complete Patient Health Questionnaire (PHQ) was used with nine items for depressive syndromes. In addition, well-being was measured by the Well-Being Index WHO-5. In the quantitative and qualitative part of the study psychopathological syndromes and well-being were related to social isolation and feelings of loneliness.ResultsAfter 1.5 years of pandemic-related social restrictions, “major” depressive syndromes were reported by 40.16% of the respondents to the PHQ in a sample of 2,318 university students. 72.52% showed a severely reduced Well-Being-Index. Nine months after the end of social restrictions, “major” depressive syndromes were reported by 28.50% of the participants. Well-being improved after the alleviation of social restrictions, as well: 53.96% showed a Well-Being Index of below 50 vs. 72.52% in the first study. The quantitative and qualitative analysis of the free texts of the respondents suggest that a significant amount of depressive syndromes and reduced well-being are related to social isolation and loneliness. While in the times of the pandemic restrictions the participants mostly reported “loneliness and social isolation” (24.2%) as their main problem, only 7.7% described these as their main problem after social restrictions had been loosened for 9 months. The qualitative analysis hints that at t2 participants were more likely to mention possible ways to actively deal with loneliness than at t1, which might be interpreted along the lines of the decrease in depressive syndromes.DiscussionKeeping the self-selection bias in mind our study results suggest that one third of “major” depressive syndromes and one quarter of severely reduced well-being accompany social restrictions or are even caused by them, with loneliness being an important factor. These results should be taken into account by health policies when coping with future pandemics

EU-Gipfel: Kann eine Fiskalunion den Euro retten?

Ende Januar einigten sich 25 EU-Staaten in einem Fiskalpakt auf Schuldenbremsen, die sie auf eine Politik des ausgeglichenen Haushalts festlegen. Für den Fall von Abweichungen soll ein automatischer Korrekturmechanismus in die Regelungen integriert werden. Die Einfügung von Schuldenbremsen in die nationalen Gesetzgebungen soll durch den Europäischen Gerichtshof überprüft werden. Ist der Euro so zu retten?

Creativity and psychopathology – an interdisciplinary view

Abstract: Since ancient philosophy extraordinary creativity is associated with mental disorders, emo-tional and cognitive destabilization, and melancholia. We here summarize the results of em-pirical and narrative studies and analyze the most prominent case of a highly creative person who suffered from dysthymia and major depression with suicidality. Hereby, we focus on the interaction of different phases of the creative process with ―bipolar‖ personality traits. Finally, we offer an interdisciplinary interpretation of the creative dialectics between order and chaos. The results show that severe psychopathology inhibits creativity. Mild and moderate disorders can inspire and motivate creative work but are only leading to new and useful solutions when creators succeed in transforming their emotional instability and cognitive incoherence into stable and coherent forms. The cultural idea that creativity emerges in dialectical processes between order and chaos, is also to be found in the psychologic interplay of coherence and incoherence, and in neuro-scientific models of the dynamics between tightening and loosen-ing of neuronal structures. Consequences are drawn for the psychotherapeutic treatment of persons striving for creativity

Fear, depression, and well-being during COVID-19 in German and South African students: A cross-cultural comparison

Various studies have shown a decrease in well-being and an increase in mental health problems during the COVID-19 pandemic; however, only a few studies have explored fear, depression, and well-being crossculturally during this time. Accordingly, we present the results of a crosscultural study that (1) compares these mental health scores for German and South African students, (2) compares the correlations among them, and (3) identifies COVID-19 fear, well-being, and depression predictors. German and South African societies differ from each other socio-culturally, politically, and economically. Their university systems also differ to a large extent. University students in both countries completed the Fear of COVID-19 Scale, the World Health Organization-Five Well-Being Index (WHO-5), and the Patient Health Questionnaire-9 (PHQ-9). Welch’s t-test, correlation, and multiple regression analyses were performed. (1) German students were found to have statistically lower levels of COVID-19 fear and depression, but lower levels of general wellbeing than South African students. (2) In both samples, fear of COVID-19 was negatively correlated with well-being and positively associated with femalegender and depression. (3) Additionally, female gender, depression, and lower well-being were identified as predictors of COVID-19 fear in both samples. The findings indicate that the fear of COVID-19 is associated with and varies according to gender, depression, and well-being across cultures, and that the difference in the intensity of fear between German and South African students may be partly explained by cultural and contextual differences. These findings can create a deeper understanding of the pandemic’s impact on student communities and may be used by mental health practitioners and researchers to develop and apply culture-specific interventions