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On the relationship between mobility, population growth, and capital spending in the United States

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  • Marco Bassetto
  • Leslie McGranahan

Abstract

In this paper, we assess the empirical relationship between population growth, mobility, and state-level capital spending in the United States. To evaluate the magnitude of the coefficients, we introduce an explicit, quantitative political-economy model of government spending determination, where mobility and population growth generate departures from Ricardian equivalence. Our estimates find strong responses in the level of capital provision per capita to these demographic movements; in fact, the resulting coefficients are stronger than the model delivers. Regression coefficients on population growth and mobility also yield opposite implications for the direction to which spending is distorted by the political-economy friction, posing a further challenge.

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Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-09-25.

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Date of creation: 2009
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Handle: RePEc:fip:fedhwp:wp-09-25

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  1. Marco Battaglini, 2009. "On the Case for a Balanced Budget Amendment to the U.S. Constitution," 2009 Meeting Papers 131, Society for Economic Dynamics.
  2. Marco Bassetto & Vadym Lepetyuk, 2007. "Government investment and the European stability and growth pact," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 33-43.
  3. Zheng Song & Kjetil Storesletten & Fabrizio Zilibotti, 2007. "Rotten parents and disciplined children: a politico-economic theory of public expenditure and debt," IEW - Working Papers 325, Institute for Empirical Research in Economics - University of Zurich.
  4. Marco Battaglini & Stephen Coate, 2005. "Inefficiency in Legislative Policy-Making: A Dynamic Analysis," NBER Working Papers 11495, National Bureau of Economic Research, Inc.
  5. repec:bla:restud:v:75:y:2008:i:3:p:789-808 is not listed on IDEAS
  6. Marco Battaglini & Steve Coate, 2006. "A Dynamic Theory of Public Spending, Taxation and Debt," Levine's Bibliography 122247000000001094, UCLA Department of Economics.
  7. Jordan Rappaport, 1999. "Local Growth Empirics," CID Working Papers 23, Center for International Development at Harvard University.
  8. marina, azzimonti, 2009. "Barriers to investment in polarized societies," MPRA Paper 25936, University Library of Munich, Germany.
  9. Timothy Besley & Torsten Persson & Daniel M. Sturm, 2010. "Political Competition, Policy and Growth: Theory and Evidence from the United States," CEP Discussion Papers dp1009, Centre for Economic Performance, LSE.
  10. Marco Bassetto & Thomas J Sargent, 2006. "Politics and Efficiency of Separating Capital and Ordinary Government Budgets," The Quarterly Journal of Economics, MIT Press, vol. 121(4), pages 1167-1210, November.
  11. Ruediger Bachmann & Jinhui Bai, 2010. "Government Purchases Over the Business Cycle: the Role of Economic and Political Inequality," NBER Working Papers 16247, National Bureau of Economic Research, Inc.
  12. Ross, Stephen & Yinger, John, 1999. "Sorting and voting: A review of the literature on urban public finance," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 47, pages 2001-2060 Elsevier.
  13. Marco Bassetto, 2008. "Public investment and budget rules for state vs. local governments," Working Paper Series WP-08-21, Federal Reserve Bank of Chicago.
  14. Paul Klein & Per Krusell & José-V�ctor R�os-Rull, 2008. "Time-Consistent Public Policy," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 789-808.
  15. John Kennan & James R. Walker, 2003. "The Effect of Expected Income on Individual Migration Decisions," NBER Working Papers 9585, National Bureau of Economic Research, Inc.
  16. Marco Battaglini & Stephen Coate, 2008. "Fiscal Policy over the Real Business Cycle: A Positive Theory," NBER Working Papers 14047, National Bureau of Economic Research, Inc.
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Cited by:
  1. Marina Azzimonti, 2013. "The dynamics of public investment under persistent electoral advantage," Working Papers 13-43, Federal Reserve Bank of Philadelphia.
  2. Holmes, Thomas J. & Ohanian, Lee E., 2014. "Pay with Promises or Pay as You Go? Lessons from the Death Spiral of Detroit," Staff Report 501, Federal Reserve Bank of Minneapolis.
  3. Giuseppe Bertola, 2011. "The Role of the State in Society - Government vs. Citizen Responsibility," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 12(3), pages 32-37, December.

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