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Regional Effects of Federal Tax Shocks

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  • Bernd Hayo

    ()
    (University of Marburg)

  • Matthias Uhl

    ()
    (University of Marburg)

Abstract

This paper studies regional output asymmetries following U.S. federal tax shocks. We estimate a vector autoregressive model for each U.S. state, utilizing the exogenous tax shock series recently proposed by Romer and Romer (2010) and find considerable variations: estimated output multipliers lie between –0.2 in Utah and –3.3 in Hawaii. Statistically, the difference between state and national output effect is significant in about half the U.S. states. Analyzing the determinants of differences in the magnitude of regional tax multipliers suggests that industry composition of output and sociodemographic characteristics help explain the observed asymmetry across U.S. states in the transmission of federal tax policy.

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File URL: https://www.uni-marburg.de/fb02/makro/forschung/magkspapers/17-2012_hayo.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201217.

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Length: 32 pages
Date of creation: 2012
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:201217

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Related research

Keywords: Fiscal Policy Tax Policy Narrative Approach U.S. States Regional Effects Asymmetries in Fiscal Policy Transmission;

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References

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  1. Bernd Hayo & Matthias Uhl, 2011. "The Effects of Legislated Tax Changes in Germany," MAGKS Papers on Economics 201142, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
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  20. Kim, Soyoung & Roubini, Nouriel, 2008. "Twin deficit or twin divergence? Fiscal policy, current account, and real exchange rate in the U.S," Journal of International Economics, Elsevier, vol. 74(2), pages 362-383, March.
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  24. Gerald Carlino & Keith Sill, 2000. "Regional income fluctuations: common trends and common cycles," Working Papers 00-8, Federal Reserve Bank of Philadelphia.
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