Municipal indebtedness in Spain revisited: the impact of borrowing limits and urban development

This article investigates the effectiveness of municipal debt control in order to avoid excessive indebtedness, and the impact of urban development on local government financing practices. The various hypotheses are tested using municipallevel microdata for the Spanish region of Navarra. The empirical results confirm the effectiveness of debt restrictions and show that revenue from urban development policies has provided an alternative debt-financing instrument.