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Ricardian Equivalence for Sub-national States

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  • Jo Anna Gray

    ()
    (University of Oregon Economics Department)

  • Joe Stone

    ()
    (University of Oregon Economics Department)

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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Bibliographic Info

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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  1. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  2. Razzolini, Laura & Shughart, William F, II, 1997. " On the (Relative) Unimportance of a Balanced Budget," Public Choice, Springer, vol. 90(1-4), pages 215-33, March.
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  7. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
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  13. Cardia, Emanuela, 1997. "Replicating Ricardian Equivalence Tests with Simulated Series," American Economic Review, American Economic Association, vol. 87(1), pages 65-79, March.
  14. Feldstein, Martin & Elmendorf, Douglas W, 1990. "Government Debt, Government Spending, and Private Sector Behavior Revisited: Comment," American Economic Review, American Economic Association, vol. 80(3), pages 589-99, June.
  15. Eric M. Engen & R. Glenn Hubbard, 2004. "Federal Government Debt and Interest Rates," NBER Working Papers 10681, National Bureau of Economic Research, Inc.
  16. Ronald C. Fisher, 1997. "Effects of state and local public services on economic development," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 53-82.
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Cited by:
  1. Stone, Joe & Bania, Neil, 2009. "Brains, drains, and roads, growth hills: complementarity between public education and infrastructure in a half-century panel of states," MPRA Paper 16173, University Library of Munich, Germany.

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