The effect of fiscal conditions of local government authorities on their economic development

This article examines the effect of the prior fiscal conditions of local government authorities in Israel on subsequent development in two major areas: education and employment. The relationships between the fiscal conditions of local government authorities in Israel for 1997 and 1998 and the levels of education and employment in 2001 are empirically examined. The results show that prior fiscal conditions of local governments had a significant effect on their subsequent educational and employment development. Compared to relatively fiscally poor local authorities, those that were fiscally healthier in 1997 and 1998 enjoyed better education and employment systems in 2001.