Local governments’ indebtedness and its impact on real estate prices

Bibliographic Data

ID10864943
AuthorsMartin Micheli (RWI – Leibniz Institute for Economic Research, corresponding author)
Year2020
Volume57
Issue5
Pages1032-1048
Publication date2020-04-01
Open AccessYes
TypeARTICLE
VenueUrban Studies (JOURNAL)
Journal identifiersISSN: 0042-0980 • E-ISSN: 1360-063X
PublisherSAGE Publications (PUBLISHER • US)
DOI10.1177/0042098018821069
OpenAlexW3122990525
LanguageEN
References cited25

This paper estimates the causal effect of public debt on real estate prices and rental prices. We identify shocks to debt of self-governed cities in Germany and control for potential benefits such as an increased supply of public goods, which may come together with increased indebtedness. Using spatial variation across self-governed cities, we can quantify the causal effect. We find that shocks to public debt capitalise into property prices, questioning the presence of debt illusion in Germany. Rental prices, on the other hand, do not seem affected by public debt but by the actual tax burden, indicating that renter illusion does not reflect an illusion but rational behaviour

Control (management · Debt · Economics · Macroeconomics · Microeconomics · Monetary economics · Public good · Real estate · Renting · Finance · Fiscal Policies and Political Economy · Fiscal Policy and Economic Growth · Housing Market and Economics

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