EVALUATING THE EFFECTS OF A CASH WINDFALL ON A LOCAL GOVERNMENT'S FISCAL BEHAVIOUR: EVIDENCE FROM FRANCE

Abstract

This thesis investigates how local governments in France make use of a windfall in cash revenues. This increase in cash revenues is attributed to a rise in the value of the reimbursed income taxes made by the Swiss government to the French local governments, due to the presence of French residents heading to Switzerland to work and paying income taxes to the Swiss authorities. Using the synthetic control method, this paper finds a statistically significant increase in local government purchases per capita as well as public investment per capita between 2015 and 2017 for the states that experienced the cash windfall, and these results are robust to the addition of new predictor variables. The results indicate that states made use of the cash windfall through an increase in their spending.