Local government fragmentation and impact on local government debt : A panel data analysis of Swedish municipalities

Abstract: This paper sets out to investigate the impact of government fragmentation on local government debt. The weak government hypothesis states that government fragmentation leads to higher budget deficits and higher public debt. The hypothesis is tested on a panel dataset comprised of 285 out of 290 Swedish municipalities over the period 2000-2017. The impact of government fragmentation is explained using government inaction theory and the common-pool problem. I find no evidence supporting that coalition governments generally accumulate higher public debt compared to single-party governments. However, there is evidence for the that ideological differences within coalition governments have a positive effect on the municipal debt level.