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Intertemporal Analysis of State and Local Government Spending: Theory ad Tests

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Author Info
Douglas Holtz-Eakin
Harvey S. Rosen
Schuyler Tilly

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Abstract

Do state and local governments smooth their consumption spending across years, or is their spending driven mainly by contemporaneous changes in resources? We design a test to determine which view of state and local spending is more consistent with the data. We find that state and local spending is determined primarily by current (as opposed to permanent) resources. That is, despite their apparent ability to skirt balanced budget laws, states and localities do not typically smooth their expenditures over time.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4261.

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Date of creation: May 1994
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Handle: RePEc:nbr:nberwo:4261

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Find related papers by JEL classification:
H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December. [Downloadable!] (restricted)
  2. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October. [Downloadable!] (restricted)
  3. James M. Poterba & Julio J. Rotemberg, 1990. "Inflation And Taxation With Optimizing Governments," NBER Working Papers 2567, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Campbell, John Y & Mankiw, N Gregory, 1990. "Permanent Income, Current Income, and Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(3), pages 265-79, July.
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  5. Mankiw, N. Gregory, 1987. "The optimal collection of seigniorage : Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 327-341, September. [Downloadable!] (restricted)
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  6. Marjorie Flavin, 1985. "Excess Sensitivity of Consumption to Current Income: Liquidity Constraints or Myopia?," Canadian Journal of Economics, Canadian Economics Association, vol. 18(1), pages 117-36, February. [Downloadable!] (restricted)
  7. Michael J. Boskin & Marc S. Robinson & Alan M. Huber, 1987. "New Estimates of State and Local Government Tangible Capital and Net Investment," NBER Working Papers 2131, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Douglas Holtz-Eakin & Harvey S. Rosen, 1993. "Municipal Construction Spending: An Empirical Examination," NBER Working Papers 2989, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Abel, Andrew B & Blanchard, Olivier J, 1986. "The Present Value of Profits and Cyclical Movements in Investment," Econometrica, Econometric Society, vol. 54(2), pages 249-73, March. [Downloadable!] (restricted)
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  10. Mieszkowski, Peter & Zodrow, George R, 1989. "Taxation and the Tiebout Model: The Differential Effects of Head Taxes, Taxes on Land Rents, and Property Taxes," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1098-1146, September. [Downloadable!] (restricted)
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  1. Antti Moisio, 2001. "On Local Government Spending and Taxation Behaviour - Effect of population size and economic condition," ERSA conference papers ersa01p170, European Regional Science Association. [Downloadable!]
  2. Antti Moisio, 2001. "On Local Government Spending and Taxation Behaviour - effect of population size and economic condition," Discussion Papers 257, Government Institute for Economic Research Finland (VATT). [Downloadable!]
  3. Antti Moisio, 2002. "Essays on Finnish Municipal Finance and Intergovernmental Grants," Research Reports 93, Government Institute for Economic Research Finland (VATT). [Downloadable!]
  4. Lars-Erik Borge & Per Tovmo, 2007. "Myopic or constrained by balanced-budget-rules? The intertemporal spending behavior of Norwegian local governments," Working Paper Series 8807, Department of Economics, Norwegian University of Science and Technology. [Downloadable!]
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  5. Aronsson, Thomas, 2004. "Social Accounting and the Public Sector," UmeÃ¥ Economic Studies 644, Umeå University, Department of Economics. [Downloadable!]
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