Document Type

Article

Publication Date

2021

DOI

10.1086/712917

Publication Title

National Tax Journal

Volume

74

Issue

1

Pages

9-43

Abstract

In this paper, we estimate the long-term causal effect of population losses on local government revenue, expenditure, and debt by exploiting a quasi-exogenous change that reduced the number of US military personnel by about 40 percent between the late 1980s and 2000. Aggregating across governmental units within commuting zones, we find that real per capita total revenues and expenditures remained unchanged for remaining citizens. At the same time, however, we note several important compositional effects. First, local governments appear to have offset reductions in state intergovernmental aid by increasing property tax revenues. Second, they significantly shifted the composition of expenditures by making disproportionately large cuts in capital spending, including cuts in K–12 education, to maintain levels for current operations. Third, localities increased their long-term nonguaranteed debt to finance investments not covered by general capital outlays. Taken together, these actions run the risk of hindering a region’s relative competitiveness in the long term.

Comments

© 2021 National Tax Association. All rights reserved. Published by The University of Chicago Press on behalf of the National Tax Association.

Included with a 12 month embargo in accordance with publisher policy, with the kind written permission of the publisher.

Original Publication Citation

Komarek, T. M., & Wagner, G. A. (2021). Local fiscal adjustments from depopulation: Evidence from the post–cold war defense contraction. National Tax Journal, 74(1), 9-43. https://doi.org/10.1086/712917

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