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Budget Rules and State Business Cycles

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Author Info

  • Robert Krol

    (California State University, Northridge, robert.krol@csun.edu)

  • Shirley Svorny

    (California State University, Northridge)

Abstract

Levinson (1998) finds that large states with lenient balanced budget rules experience less cyclical variability. He concludes that state fiscal policy works. However, Levinson's finding is not robust to alternative methods of detrending the data. In addition, the 1984 Advisory Commission on Intergovernmental Relations (ACIR) analysis of state budget rules used by Levinson (and other researchers) is of questionable merit. Reestimation of Levinson's regressions using budget rule classifications in a U.S. General Accounting Office (GAO) study reverses his result. The results from this study suggest that existing empirical work using the ACIR index should be revisited.

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Bibliographic Info

Article provided by in its journal Public Finance Review.

Volume (Year): 35 (2007)
Issue (Month): 4 (July)
Pages: 530-544

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Handle: RePEc:sae:pubfin:v:35:y:2007:i:4:p:530-544

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Related research

Keywords: balanced budget rules; business cycles; stabilization policy; state level public finance;

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Cited by:
  1. Mahdavi, Saeid & Westerlund, Joakim, 2011. "Fiscal stringency and fiscal sustainability: Panel evidence from the American state and local governments," Journal of Policy Modeling, Elsevier, vol. 33(6), pages 953-969.
  2. Clemens, Jeffrey, 2013. "State Fiscal Adjustment During Times of Stress: Possible Causes of the Severity and Composition of Budget Cuts," MPRA Paper 55921, University Library of Munich, Germany.
  3. Clemens, Jeffrey & Miran, Stephen, 2010. "The effects of state budget cuts on employment and income," MPRA Paper 38715, University Library of Munich, Germany.

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