The Consequences of Coping with Demographic Change for Fiscal Capacity of and Unemployment in German Municipalities

Abstract

Chapter 11 outlines whether and, if so, how municipal demographic policy affects the fiscal capacity and the local labour market of German municipalities. Both aspects form the economic foundation of good local governance. The conceptual framework refers to Hartmut Esser’s model of frame selection, which belongs to the family of dual-process theories. It integrates explanatory and interpretive sociological paradigms and operationalises a theoretical triad of framing, coping and institution on the basis of a comparative analysis using sequential regression models and data obtained from a secondary analysis of a dataset that links data from a German mayor survey by the Bertelsmann Foundation in 2005 with municipal fiscal and labour market data from its Community Guide. Contrary to common assumptions, there is little empirical evidence that demographic change has direct effects on municipal budgets or local labour markets. Our multiple regression models instead pinpoint weak correlations between demographic and economic indicators. Structural discrepancies between East and West Germany remain the most influential factor, even decades after reunification. Furthermore, municipalities that actively engage in demographic policy have greater economic success. Our results according to Esser’s model of frame selection are mixed. On the one hand, there is no evidence that an appropriate frame always yields positive payoffs. On the other hand, municipalities that have family policy routines have greater economic success. This means that, when it comes to coping, local institutions, routines and local population policies matter more than demographic change or an appropriate demographic framing by local decision makers!