Ranking state fiscal structures using theory and evidence
AbstractThis paper offers unique rankings of the extent to which fiscal structures of U.S. states contribute to economic growth. The rankings are novel in two key respects: They are well grounded in established growth theory, in which the effect of taxes depends both on the level of taxes and on the composition of expenditures; and they are derived from actual estimates of the link between fiscal structures and economic growth. Estimates for the latter yield a growth hill, in which the incremental effect of taxes spent on productive services and infrastructure initially rises, reaches a peak, and then declines. Rankings derived from these estimates differ sharply from typical rankings based on levels of taxation alone. Two hypothetical policy experiments highlight both the growth-hill effects of tax investments in productive services and infrastructure and the short- and long-term tradeoffs in attempting to fund strong social services. © 2008 by the Association for Public Policy Analysis and Management.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Journal of Policy Analysis and Management.
Volume (Year): 27 (2008)
Issue (Month): 4 ()
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Web page: http://www3.interscience.wiley.com/journal/34787/home
Other versions of this item:
- Joe A. Stone & Neil Bania, 2008. "Ranking State Fiscal Structures using Theory and Evidence," University of Oregon Economics Department Working Papers 2008-6, University of Oregon Economics Department.
- Niel Bania & Joe Stone, 2007. "Ranking State Fiscal Structures using Theory and Evidence," University of Oregon Economics Department Working Papers 2007-11, University of Oregon Economics Department.
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H4 - Public Economics - - Publicly Provided Goods
- H7 - Public Economics - - State and Local Government; Intergovernmental Relations
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
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