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Benny Geys, Friedrich
Heinemann and Alexander Kalb
Local Governments in the Wake of
Demographic Change: Evidence from German Municipalities
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German municipalities are expected to suffer from intense
demographic changes in the upcoming decades; not only in the form of
population losses, but also through a changing demographic structure
(i.e. less children and adolescents, more elderly, higher dependency
ratio, and so on). We assess local governments’ vulnerability to the
fiscal consequences of these demographic transformations (using a
sample of 1021 municipalities in the state of Baden-Württemberg) by
determining the elasticity of local government cost functions to
municipalities’ demographic characteristics. Our findings indicate
that smaller municipalities are especially vulnerable to increasing
cost pressures following most of the currently predicted demographic
changes. In the absence of increased higher-level government support
(e.g. through the fiscal equalization scheme), these findings would
support a case for boundary reviews or more extensive inter-communal
cooperation. |
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