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Ricardian equivalence for sub-national states

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  • Joe Stone

    ()
    (University of Oregon)

  • Jo Anna Gray

    ()
    (University of Oregon)

Abstract

The authors test Ricardian equivalence within an endogenous growth model for U.S. states, which have high rates of migration relative to most countries. Results are consistent with both Ricardian equivalence and endogenous growth, despite the relative ease of migration. Increases in productive government expenditures increase long-run real growth by the same amount, for example, whether financed by taxes or bonds. State rules limiting the use of bond financing may play a role in supporting Ricardian equivalence. The study provides the first explicit test of Ricardian equivalence for sub-national states in the context of an endogenous growth model.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 5 (2006)
Issue (Month): 1 ()
Pages: 1-12

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Handle: RePEc:ebl:ecbull:eb-05e00011

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Keywords: endogenous growth;

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  8. Mofidi, Alaeddin & Stone, Joe A, 1990. "Do State and Local Taxes Affect Economic Growth?," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 686-91, November.
  9. Evans, Paul, 1988. "Are Consumers Ricardian? Evidence for the United States," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 983-1004, October.
  10. Eric M. Engen & R. Glenn Hubbard, 2004. "Federal Government Debt and Interest Rates," NBER Working Papers 10681, National Bureau of Economic Research, Inc.
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  12. Ronald C. Fisher, 1997. "Effects of state and local public services on economic development," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 53-82.
  13. Poterba, James M. & Rueben, Kim S., 2001. "Fiscal News, State Budget Rules, and Tax-Exempt Bond Yields," Journal of Urban Economics, Elsevier, vol. 50(3), pages 537-562, November.
  14. Feldstein, Martin & Elmendorf, Douglas W, 1990. "Government Debt, Government Spending, and Private Sector Behavior Revisited: Comment," American Economic Review, American Economic Association, vol. 80(3), pages 589-99, June.
  15. Himarios, Daniel, 1995. "Euler equation tests of Ricardian equivalence," Economics Letters, Elsevier, vol. 48(2), pages 165-171, May.
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Cited by:
  1. Stone, Joe & Bania, Neil, 2009. "Brains, drains, and roads, growth hills: complementarity between public education and infrastructure in a half-century panel of states," MPRA Paper 16173, University Library of Munich, Germany.

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