Causes of local budget deficit

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Despite some progress, research scrutinizing the causes of the fiscal deficits in local government has to be considered as underdeveloped. Theory-driven comparative analyses integrating socio-economic, institutional and actor-centered variables are scarce, and this is especially true for the Federal Republic of Germany. Hence it is still unclear which factors explain the observable variance in per capita deficits among municipalities. The research project presented here steps into this gap and analyses the impact of socio-economic, institutional and actor-centered variables on the fiscal situation of German local governments. Following the actor-centered neo-institutional heuristic, the stakeholders interests are considered as framed not only by institutional norms, standard interests and game-theoretical constellations, but also by the individuals orientations towards interaction and their claimed identities. By comparing federal states in Germany using qualitative and quantitative methodology, the antecedents of fiscal deficits shall be identified. To do so, a large-n approach is taken. Included into the sample are municipalities with more than 5.000 respectively 10.000 inhabitants. The comprehensive data set includes fiscal data, political background data and survey data gathered among key decision makers is gathered and complemented by case studies. Owing to multiple unexpected difficulties in data collection and the expansion of the empirics (more in-depth case studies, an additional full survey of 122 local councils and the inclusion of the 2010 fiscal data), the scheduled project duration of two years should be prolonged by six month. This additional time is necessary to make use of the now available unique dataset which brings together macro-, meso- and micro-level data for the first time. Only within this time frame the statistical analysis of the dataset becomes feasible, allowing to empirically testing the numerous theoretical explanations of fiscal deficits to be found in literature and to link them to the processes data gathered qualitatively.