Evaluation of local government debt in Spain

Abstract

During the last few years, there has been increased interest in the researching of Public Sector debt. In this context, this paper hopes to analyze the factors that affect the indebtedness of one of the levels of the Public Sector in Spain: the Local Sector. With this aim, we have obtained a sample of all Spanish municipalities that have more than 1,000 inhabitants in 2008 (3,253 municipalities) by applying econometrics of least squares regressions in two stages. The main conclusion obtained is that the variables that explain the level of municipal debt are heterogeneous. On the one hand, socioeconomic variables (population, percentage of immigrants, income, transfers and taxes) affect positively the level of debt per capita. On the other hand, political variables, such as political strength, suggest that weaker governments are those with a lower level of debt per capita. © 2001 Asociación Española de Contabilidad y Administración de Empresas.