In this paper, we investigate the effect of import and export shocks on German municipalities’ local business tax (LBT) bases and fiscal outcomes for the period from 1992 to 2012. Import shocks have a detrimental effect on local outcomes, while export shocks increase LBT bases as well as municipal revenues and expenditures. The effect on expenditure patterns depends on municipalities’ initial fiscal and economic conditions. Results are stronger in the 2002 to 2012 period than in the 1992 to 2002 period. We find that our results are mostly driven by trade between municipalities located in West Germany and Eastern Europe.

What are the local economic impacts of foreign troop deployments? To answer this question, we exploit variation from the historical large-scale US troop withdrawal from Germany at the end of the Cold War. We use administrative data from the US Department of Defense to precisely quantify the troop withdrawal's size at the municipal level. We deploy a Synthetic Difference-in-Differences (SDID) estimator to estimate the impacts of the troop withdrawal on local outcomes. Our results show negative effects on local labor markets and municipal public finances. Local business tax revenues decrease. Affected municipalities react by lowering their expenditures, while increasing property tax multipliers.