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Determinants of debt burdens: evidence from California counties

PFM, Vol. 15 No. 2, (2015)

This study aims at developing a better understanding and measure of the relative debt burden of governments. We use panel data from California counties for the period of 1999-2011. The analysis consists of two steps. First, we use a lognormal regression model to ana-lyze the relationship between debt levels and socio-economic, political and financial varia-bles. Results indicate that larger counties, poorer counties, and counties with higher levels of capital investment and higher tax prices have higher debt burden levels. Next, we calcu-late debt burden indices for each county by dividing the actual debt by the results of the predicted debt burdens from the first step. The debt burden indices indicate a jurisdiction’s relative reliance on debt compared to their expected debt reliance. The results of this study have direct policy implications related to debt administration and debt monitoring.

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