IDEAS home Printed from https://ideas.repec.org/a/taf/apeclt/v16y2009i3p243-246.html
   My bibliography  Save this article

Evaluating state tax revenue variability: a portfolio approach

Author

Listed:
  • Thomas Garrett

Abstract

This 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.

Suggested Citation

  • Thomas Garrett, 2009. "Evaluating state tax revenue variability: a portfolio approach," Applied Economics Letters, Taylor & Francis Journals, vol. 16(3), pages 243-246.
  • Handle: RePEc:taf:apeclt:v:16:y:2009:i:3:p:243-246
    DOI: 10.1080/13504850601018403
    as

    Download full text from publisher

    File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/13504850601018403&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/13504850601018403?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Timothy Besley & Anne Case, 2003. "Political Institutions and Policy Choices: Evidence from the United States," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 7-73, March.
    2. Sobel, Russell S. & Holcombe, Randall G., 1996. "Measuring the Growth and Variability of Tax Bases over the Business Cycle," National Tax Journal, National Tax Association, vol. 49(4), pages 535-52, December.
    3. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    4. Sobel, Russell S. & Holcombe, Randall G., 1996. "Measuring the Growth and Variability of Tax Bases Over the Business Cycle," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(4), pages 535-552, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marina Malkina, 2019. "How Change in Industry Mix Can Improve the Financial Performance of Regional Economies: Evidence from the Portfolio Approach," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 67(6), pages 1561-1575.
    2. Marina Yurievna Malkina, 2018. "Instability of Financial Return of Regional Economies and Its Determinants," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 3, pages 88-114.
    3. Yota Deli & Derek Lambert & Martina Lawless & Kieran McQuinn & Edgar L. W. Morgenroth, 2017. "How Sensitive is Irish Income Tax Revenue to Underlying Economic Activity?," The Economic and Social Review, Economic and Social Studies, vol. 48(3), pages 317-336.
    4. Aleksandra L. Osmolovskaya-Suslina & Sofiia R. Borisova, 2023. "Non-resource Revenues to the Consolidated Budget: Analysis by Types of Economic Activity," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 8-26, December.
    5. Marina Malkina & Rodion Balakin, 2015. "Correlation Assessment of Tax System Risk and Profitability in the Russian Regions," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(3), pages 241-255.
    6. Erick Michael Elder & Gary A. Wagner, 2012. "A simple approach to balancing government budgets over the business cycle," Applied Economics Letters, Taylor & Francis Journals, vol. 19(7), pages 677-681, May.
    7. Joshua Hall & Antonis Koumpias, 2015. "The Volatility of School District Income Tax Revenues: Is Tax Base Diversification a Good Idea?," Working Papers 15-14, Department of Economics, West Virginia University.
    8. Raffaele Lagravinese & Paolo Liberati & Agnese Sacchi, 2016. "The growth and variability of local taxes: An application to the Italian regions," Working Papers. Collection B: Regional and sectoral economics 1601, Universidade de Vigo, GEN - Governance and Economics research Network.
    9. Marina Malkina & Rodion Balakin, 2020. "Risks of Regional Tax Systems and Their Portfolio Decomposition: The Case of Modern Russia," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 68(6), pages 995-1009.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thomas A. Garrett & Gary A. Wagner, 2009. "Red Ink in the Rearview Mirror: Local Fiscal Conditions and the Issuance of Traffic Tickets," Journal of Law and Economics, University of Chicago Press, vol. 52(1), pages 71-90, February.
    2. Joshua Hall & Antonis Koumpias, 2015. "The Volatility of School District Income Tax Revenues: Is Tax Base Diversification a Good Idea?," Working Papers 15-14, Department of Economics, West Virginia University.
    3. Raffaele Lagravinese & Paolo Liberati & Agnese Sacchi, 2016. "The growth and variability of local taxes: An application to the Italian regions," Working Papers. Collection B: Regional and sectoral economics 1601, Universidade de Vigo, GEN - Governance and Economics research Network.
    4. Tomasz Jędrzejowicz & Kamila Sławińska, 2014. "Shifting from Labor to Consumption Taxes: The Impact on Tax Revenue Volatility," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 6, pages 81-101.
    5. Melisso Boschi & Stefano d'Addona, 2019. "The Stability of Tax Elasticities over the Business Cycle in European Countries," Fiscal Studies, John Wiley & Sons, vol. 40(2), pages 175-210, June.
    6. Mr. Koshy Mathai & Mr. Andrew J Swiston & Mr. Martin Mühleisen, 2007. "U.S. Revenue Surprises: Are Happy Days Here to Stay?," IMF Working Papers 2007/143, International Monetary Fund.
    7. Bernd Hayo & Sascha Mierzwa & Umut Unal, 2021. "Estimating Policy-Corrected Long-Term and Short-Term Tax Elasticities for the United States, Germany, and the United Kingdom," MAGKS Papers on Economics 202112, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    8. Igor Goncharov & Martin Jacob, 2014. "Why Do Countries Mandate Accrual Accounting for Tax Purposes?," Journal of Accounting Research, Wiley Blackwell, vol. 52(5), pages 1127-1163, December.
    9. Joshua C. Hall & Antonios M. Koumpias, 2018. "Growth And Variability Of School District Income Tax Revenues: Is Tax Base Diversification A Good Idea For School Financing?," Contemporary Economic Policy, Western Economic Association International, vol. 36(4), pages 678-691, October.
    10. Gary Wagner & Russell Sobel, 2006. "State budget stabilization fund adoption: Preparing for the next recession or circumventing fiscal constraints?," Public Choice, Springer, vol. 126(1), pages 177-199, January.
    11. Beata Guziejewska & Katarzyna Walerysiak-Grzechowska, . "A Local Government Revenue System under Macroeconomic Pressure: The Case of Poland," Prague Economic Papers, University of Economics, Prague, vol. 0, pages 1-23.
    12. Ismoil Khujamkulov & Sohrab Abizadeh, 2023. "Trends in tax revenues of transition economies: an empirical approach," Empirical Economics, Springer, vol. 64(2), pages 833-868, February.
    13. Garrett, Thomas A. & Coughlin, Cletus C., 2009. "Inter–Temporal Differences in the Income Elasticity of Demand for Lottery Tickets," National Tax Journal, National Tax Association;National Tax Journal, vol. 62(1), pages 77-99, March.
    14. Syed Ahsan & Panagiotis Tsigaris, 2002. "Measuring the Social Discount Rate under Uncertainty: A Methodology and Application," CESifo Working Paper Series 824, CESifo.
    15. OGNERU, Victor, 2019. "Analysis Of The Relationship Between Tax Revenue And Gross Value Added In The Romanian Economy," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 23(2), pages 37-55, June.
    16. William Spelman, 2006. "Growth, Stability, and the Urban Portfolio," Economic Development Quarterly, , vol. 20(4), pages 299-316, November.
    17. Donald Bruce & William F. Fox & M. H. Tuttle, 2006. "Tax Base Elasticities: A Multi‐State Analysis of Long‐Run and Short‐Run Dynamics," Southern Economic Journal, John Wiley & Sons, vol. 73(2), pages 315-341, October.
    18. Yilin Hou, 2005. "Fiscal Reserves and State Own-Source Expenditure in Downturn Years," Public Finance Review, , vol. 33(1), pages 117-144, January.
    19. Mehmet Serkan Tosun & Sohrab Abizadeh, 2005. "Economic growth and tax components: an analysis of tax changes in OECD," Applied Economics, Taylor & Francis Journals, vol. 37(19), pages 2251-2263.
    20. Beata Guziejewska & Katarzyna Walerysiak-Grzechowska, 2020. "A Local Government Revenue System under Macroeconomic Pressure - The Case of Poland," Prague Economic Papers, Prague University of Economics and Business, vol. 2020(1), pages 29-52.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apeclt:v:16:y:2009:i:3:p:243-246. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEL20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.