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Spatial Dependence in Models of State Fiscal Policy Convergence

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Author Info

  • Cletus C. Coughlin

    (Federal Reserve Bank of St. Louis, St. Louis, Missouri)

  • Thomas A. Garrett

    (Federal Reserve Bank of St. Louis, St. Louis, Missouri)

  • Rubén Hernández-Murillo

    (Federal Reserve Bank of St. Louis, St. Louis, Missouri)

Abstract

We apply spatial econometric techniques to models of state and local fiscal policy convergence. Our work extends the work of Scully and Annala in much the same way that Rey and Montouri extended the literature on income convergence among U.S. states. Our results indicate that most fiscal policies have been converging and that the growth paths of state and local fiscal policies are not independent. In addition, we find that total expenditures have been converging faster than output, whereas total tax revenues have been converging slower than output. Our models further demonstrate that state expenditure growth is dependent on expenditure growth in economically and demographically similar states, while output growth and revenue growth in a state are dependent on output growth and revenue growth, respectively, in contiguous states.

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Bibliographic Info

Article provided by in its journal Public Finance Review.

Volume (Year): 35 (2007)
Issue (Month): 3 (May)
Pages: 361-384

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Handle: RePEc:sae:pubfin:v:35:y:2007:i:3:p:361-384

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Related research

Keywords: convergence; state fiscal policy; spatial econometrics; state government;

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References

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Cited by:
  1. Gyawali, Buddhi Raj & Fraser, Rory & Banerjee, Ban & Bukenya, James O., 2009. "Income Convergence and Growth in Alabama: Evidence from Sub-county Level Data," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46713, Southern Agricultural Economics Association.

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