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Intergovernmental transfers and procyclical public spending

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  • Abbott, Andrew
  • Jones, Philip
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    Abstract

    This paper tests the predictions that (i) sub-central government expenditures are procyclical and (ii) sub-central government expenditures are likely to be more procyclical than central government spending. The predictions are based on the importance of ‘voracity effects’ and on the proposition that they are systematically more pervasive if spending is financed by intergovernmental transfers. Evidence from 23 OECD countries between 1995 and 2006 indicates that sub-central government spending is more procyclical than central government expenditure.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 115 (2012)
    Issue (Month): 3 ()
    Pages: 447-451

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    Handle: RePEc:eee:ecolet:v:115:y:2012:i:3:p:447-451

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    Web page: http://www.elsevier.com/locate/ecolet

    Related research

    Keywords: Sub-central government spending; Intergovernmental transfers; Voracity effects; Business cycles;

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    References

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    10. Talvi, Ernesto & Vegh, Carlos A., 2005. "Tax base variability and procyclical fiscal policy in developing countries," Journal of Development Economics, Elsevier, vol. 78(1), pages 156-190, October.
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    12. Philip R. Lane, 2002. "The Cyclical Behaviour of Fiscal Policy: Evidence from the OECD," Trinity Economics Papers, Trinity College Dublin, Department of Economics 20022, Trinity College Dublin, Department of Economics.
    13. Riccardo Fiorito, 1997. "Stylized Facts of Government Finance in the G-7," IMF Working Papers 97/142, International Monetary Fund.
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    15. Daniel Bergvall & Claire Charbit & Dirk-Jan Kraan & Olaf Merk, 2006. "Intergovernmental Transfers and Decentralised Public Spending," OECD Working Papers on Fiscal Federalism 3, OECD Publishing.
    16. Dougan, William R & Kenyon, Daphne A, 1988. "Pressure Groups and Public Expenditures: The Flypaper Effect Reconsidered," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 26(1), pages 159-70, January.
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    Cited by:
    1. Abbott, Andrew & Jones, Philip, 2012. "Budget deficits and social protection: Cyclical government expenditure in the OECD," Economics Letters, Elsevier, Elsevier, vol. 117(3), pages 909-911.
    2. Makkonen, Teemu, 2013. "Government science and technology budgets in times of crisis," Research Policy, Elsevier, Elsevier, vol. 42(3), pages 817-822.

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