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Ricardian Equivalence for Sub-national States

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Author Info
Jo Anna Gray () (University of Oregon Economics Department)
Joe Stone () (University of Oregon Economics Department)

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Abstract

The authors test Ricardian equivalence within an endogenous growth model for U.S. states, which have high rates of migration relative to most countries. Results are consistent with both Ricardian equivalence and endogenous growth, despite the relative ease of migration. Increases in productive government expenditures increase long-run growth by the same amount, for example, whether financed by taxes or bonds. State rules limiting the use of bond financing may play a role in supporting Ricardian equivalence. The study provides the first explicit test of Ricardian equivalence for sub-national states in the context of an endogenous growth model.

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File URL: http://economics.uoregon.edu/papers/UO-2006-2_Gray_Sub-national.pdf
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Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2006-2.

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Length: 12
Date of creation: 01 Dec 2005
Date of revision: 01 Dec 2005
Handle: RePEc:ore:uoecwp:2006-2

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