Form of Government and Public Spending in a Fiscal Crisis
*Names in bold indicate Presenter
This paper uses a natural variation in fiscal management outcomes before and after the Great Recession to test if the form of government affected city responses to the fiscal crisis. Specifically, I follow the logic of the public accountability model and expect mayor-council cities to cut services and defer capital outlays in a recession less often and to a lesser extent than council-manager cities.
The empirical strategy of this paper is as follows. First, I will use propensity score matching to identify mayor-council and council-manager cities that are similar by observed socio-economic and fiscal characteristics before the Great Recession (FY 2007). Then, I will examine differences in general spending and capital outlays before and after the Recession for the matched observations. As the U.S. Census Bureau surveys all city governments once in five years, models on the full sample will be run only for FY 2007 and FY 2012. In addition, I will test the models on a smaller subsample of governments surveyed by the Census Bureau annually between FY 2007 and FY 2012 and use moving averages of changes in general spending and capital outlays in FY 2008, 2009, 2010, 2011, 2012 as response variables.
Findings of smaller and less frequent spending cuts and capital outlay cuts by mayor-councils will support the Coate and Knight (2011) model. Lack of statistically significant differences in spending will support the work by McDonald (2008) who found no effects of the form of government on public spending. Findings of higher and more frequent spending cuts and capital outlay cuts by mayor-council cities will be interpreted as positive effects of city government professionalization (the council-manager form of government) on the practice of financial management.
Coate, Stephen and Brian Knight. 2011. Government Form and Public Spending: Theory and Evidence from U.S. Municipalities, American Economic Journal: Economic Policy3(3): 82-112.
McDonald, Lynn. 2008. The Impact of Government Structure on Local Public Expenditures, Public Choice 136 (3-4): 457-473.