Local deficits and local jobs: can U.S. statess stabilize their own economies?
AbstractUsing a sample of the 48 mainland U.S. states for the period 1973-2009, we study the ability of U.S. states to expand their own state employment through the use of state deficit policies. The analysis allows for the facts that U.S. states are part of a wider monetary and economic union with free factor mobility across all states and that state residents and firms may purchase goods from “neighboring” states. Those purchases may generate economic spillovers across neighbors. Estimates suggest that states can increase their own state employment by increasing their own deficits. There is evidence of spillovers to employment in neighboring states defined by common cyclical patterns among state economies. For large states, aggregate spillovers to its economic neighbors are approximately two-thirds of the large state’s job growth. Because of significant spillovers and possible incentives to free-ride, there is a potential case to actively coordinate (i.e., centralize) the management of stabilization policies. Finally, when these deficits are scheduled for repayment the job effects of a temporary increase in state own deficits persist for at most one to two years and there is evidence of a negative impact of state jobs.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 13-11.
Date of creation: 2013
Date of revision:
Other versions of this item:
- Carlino, Gerald A. & Inman, Robert P., 2013. "Local deficits and local jobs: Can US states stabilize their own economies?," Journal of Monetary Economics, Elsevier, vol. 60(5), pages 517-530.
- Gerald Carlino & Robert P. Inman, 2013. "Local Deficits and Local Jobs: Can U.S. States Stabilize Their Own Economies?," NBER Working Papers 18930, National Bureau of Economic Research, Inc.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
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