Silent Decline, Loud Indicators: Depopulation and the Measurement of Per Capita Fiscal Outcomes in Small Municipalities

This study examines the relationship between depopulation from 2015 to 2022 and changes in key per capita fiscal indicators in Spanish municipalities with fewer than 20,000 inhabitants. Using a long-difference approach and disaggregating by population size, it analyzes associations between population decline and debt, nonfinancial expenditure, and nonfinancial revenue per capita, distinguishing between taxes and transfers. Results show that depopulation is associated with higher expenditure and revenue per capita, while its association with debt is significant only in the full sample and the smallest municipalities. Municipalities under 1,000 inhabitants display patterns consistent with more persistent fiscal pressures. Higher income per capita is also associated with more favorable observable fiscal outcomes. A central contribution is to show that increases in per capita fiscal indicators under demographic decline may reflect shrinking population bases rather than stronger fiscal capacity, implying that per capita indicators may overstate fiscal strength and should be interpreted with caution.