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The rise of the states: U.S. fiscal decentralization in the postwar period

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  • Baicker, Katherine
  • Clemens, Jeffrey
  • Singhal, Monica

Abstract

One of the most dramatic changes in the fiscal federalism landscape during the postwar period has been the rapid growth in state budgets, which almost tripled as a share of GDP and doubled as a share of government spending between 1952 and 2006. We argue that the greater role of states cannot be easily explained by changes in Tiebout forces of fiscal competition, such as mobility and voting patterns, and are not accounted for by demographic or income trends. Rather, we demonstrate that much of the growth in state budgets has been driven by changes in intergovernmental interactions. Restricted federal grants to states have increased, and federal policy and legal constraints have also mandated or heavily incentivized state own-source spending, particularly in the areas of education, health and public welfare. These outside pressures moderate the forces of fiscal competition and must be taken into account when assessing the implications of observed revenue and spending patterns.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 96 (2012)
Issue (Month): 11 ()
Pages: 1079-1091

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Handle: RePEc:eee:pubeco:v:96:y:2012:i:11:p:1079-1091

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Web page: http://www.elsevier.com/locate/inca/505578

Related research

Keywords: Fiscal federalism; Tiebout; Decentralization; Intergovernmental grants; Intergovernmental mandates;

References

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Citations

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Cited by:
  1. Jeffrey Clemens, 2014. "Regulatory Redistribution in the Market for Health Insurance," NBER Working Papers 19904, National Bureau of Economic Research, Inc.
  2. Boadway, Robin & Tremblay, Jean-François, 2012. "Reassessment of the Tiebout model," Journal of Public Economics, Elsevier, vol. 96(11), pages 1063-1078.
  3. Jeffrey Clemens & Joshua D. Gottlieb, 2013. "Bargaining in the Shadow of a Giant: Medicare's Influence on Private Payment Systems," NBER Working Papers 19503, National Bureau of Economic Research, Inc.
  4. Jia, Junxue & Guo, Qingwang & Zhang, Jing, 2014. "Fiscal decentralization and local expenditure policy in China," China Economic Review, Elsevier, vol. 28(C), pages 107-122.
  5. Sylvain Leduc & Daniel Wilson, 2013. "Are state governments roadblocks to federal stimulus? Evidence from highway grants in the 2009 Recovery Act," Working Paper Series 2013-16, Federal Reserve Bank of San Francisco.

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