Abstract

As a result of the current economic crisis, with the consequent borrowing constraints imposed on municipalities and curbs on public deficit, the resources of local governments have been severely reduced. In this context, the creation of devolved organizations provides municipalities with a means of eliminating certain forms of debt from their budget items. The aim of this study is to determine whether inter-municipal cooperation, public-private collaboration and decentralization, together with the political and financial characteristics of the local authority in question, are factors constraining it to present a particular level of debt in times of economic crisis. To achieve these goals, various databases were used to study a sample of 1,238 local authorities for the period 2008-2011, to determine which of these factors influence municipal debt in Spain. Application of a pooled regression model showed that financial variables are factors that influence the level of municipal debt, as does the political orientation of the governing local party. We also found that local councils presenting higher levels of inter-municipal cooperation and those with a higher degree of decentralization have higher levels of debt.

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