The Tax-Spending Nexus: Evidence from a Panel of US State- Local Governments
AbstractWe re-examine the tax-spending nexus using a panel of 50 US state-local government units between 1963 and 1997. We find that, unlike tax revenues, expenditures adjust to revert back to a long-term equilibrium relationship. The evidence on the short-term dynamics is also consistent with the tax-and-spend hypothesis. One implication of this finding is that the size of the government at the state-local level is not determined by expenditure demand, but rather by resource supply. This is consistent with the fact that many US state and local governments operate under constitutional or legislative limitations that seek to constrain deficits.
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Bibliographic InfoPaper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 378.
Length: 18 pages
Date of creation: 11 Sep 2009
Date of revision:
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Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
More information through EDIRC
Tax-spend; State and local government; Public finance; Panel unit root; Panel cointegration;
Other versions of this item:
- Westerlund, Joakim & Mahdavi, Saeid & Firoozi, Fathali, 2011. "The tax-spending nexus: Evidence from a panel of US state-local governments," Economic Modelling, Elsevier, vol. 28(3), pages 885-890, May.
- Saeid Mahdavi & Joakim Westerlund, . "The Tax Spending Nexus: Evidence from a Panel of US State-Local Governments," Working Papers 0045, College of Business, University of Texas at San Antonio.
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-26 (All new papers)
- NEP-PBE-2009-09-26 (Public Economics)
- NEP-URE-2009-09-26 (Urban & Real Estate Economics)
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