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Modeling the Louisiana Local Government Fiscal Module in a Disequilibrium Environment: A Modified COMPAS Model Approach

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  • Adhikari, Arun
  • Fannin, J. Matthew

Abstract

Abstract. The objective of this study is to assess and measure the relative forecasting performance of local government expenditures in Community Policy Analysis Models (COMPAS) during periods of supply/demand disequilibrium. We evaluate whether a fiscal module under the COMPAS framework (an equilibrium model) fits better under a disequilibrium economic en- vironment. We find that both a simple naïve model with one year lagged expenditure and a lagged expenditure model with revenue capacity variables significantly increased forecasting performance relative to the traditional supply/demand equilibrium model of the public sec- tor. We also found weak evidence suggesting that in cases where the equilibrium model is used in a cross-sectional setting, quantile regression may improve forecasting performance given the heterogeneity in the quantity and quality of preferences in public services.

Suggested Citation

  • Adhikari, Arun & Fannin, J. Matthew, 2013. "Modeling the Louisiana Local Government Fiscal Module in a Disequilibrium Environment: A Modified COMPAS Model Approach," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 43(2).
    • Handle: RePEc:ags:jrapmc:243954
    DOI: 10.22004/ag.econ.243954
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    1. Bose, Srimoyee, 2015. "Determinants of Per Capita State-Level Health Expenditures in the United States: A Spatial Panel Analysis," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 45(1).

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