Causes of Fiscal Crises in State and Local Governments
Title
Causes of Fiscal Crises in State and Local Governments
Author
Kogan, Vladimir
Research Area
Social Institutions
Topic
Government Systems
Abstract
Financial insolvency is a rare occurrence in American state and local governments. However, when it does happen, as in the case of Detroit's historical bankruptcy filing in 2013, the consequences for vital city services, public employees, and taxpayers can be devastating. This essay reviews existing and emerging research on the causes of government fiscal crises, paying particular attention to how social, economic, and legal constraints interact with the electoral incentives faced by public officials to create financial distress. It concludes by identifying a number of open questions that should guide future research, to help identify potential institutional and political reforms that can help avert future problems before they occur.