Abstract
ABSTRACT This paper attempts to investigate the association between local public finance and housing market. We deal with the potential endogeneity problem by utilizing two-stage-least-square (2SLS) model. Our empirical results suggest that (1) the average housing price is positively and significantly associated with local revenue. (2) The average housing price is positively associated with local expenditure, though not significantly. (3) The rise of average housing price is also proven to reduce the local deficit significantly. (4) While the flypaper effect is obvious in Taiwan’s local expenditure, the opportunistic political business cycle theory is not so significant.
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