Evaluating state tax revenue variability: a portfolio approach
AbstractThis article develops a volatility model based on portfolio theory to examine state tax revenue variability. Unlike traditional parametric methods used to analyse state tax revenue variability, the portfolio approach allows the computation of a tax's share of total tax revenue that minimizes the overall variability in total state tax revenue given a state's portfolio of tax revenue sources. The model can thus be used to evaluate how closely a state's revenue portfolio is constructed to minimize variability in total state tax revenue. An empirical application of the model is conducted on a sample of US states. The volatility model presented here serves as a useful complement to parametric techniques that have been used to estimate tax revenue variability.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics Letters.
Volume (Year): 16 (2009)
Issue (Month): 3 ()
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Other versions of this item:
- Thomas A. Garrett, 2006. "Evaluating state tax revenue variability: a portfolio approach," Working Papers 2006-008, Federal Reserve Bank of St. Louis.
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