Severity and Persistence of Fiscal Deficits in Spanish Municipalities: Across-the-board or Targeted Adjustments?

Abstract

This research analyzed the fiscal adjustment processes of an important segment of Spanish municipalities (Galicia), and verified procyclical fiscal policy adjustments. The severity of municipal fiscal deficits and their persistence led to a strategy of targeted cuts. Contradicting the literature, expenses in providing core services were most affected. These cuts were partially offset by increased resources from other public administrations. We have not been able to verify significant adjustments in administrative expenses, which could be explained by the hypothesis of the budgetary maximization of the bureaucrats.