Ranking State Fiscal Structures using Theory and Evidence
AbstractThis paper offers unique rankings of the extent to which fiscal structures of U.S. states contribute to economic growth. The rankings are novel in two key respects: they are well grounded in established growth theory, in which the effect of taxes depends both on the level of taxes and on the composition of expenditures; and they are derived from actual estimates of the link between fiscal structures and economic growth. Estimates for the latter yield a growth hill, in which the incremental effect of taxes spent on productive services and infrastructure initially rises, reaches a peak, and then declines. Rankings derived from these estimates differ sharply from typical rankings based on levels of taxation alone. Two hypothetical policy experiments highlight both the growth-hill effects of tax investments in productive services and infrastructure and the short- and long-term tradeoffs in attempting to fund strong social services.
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Bibliographic InfoPaper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2007-11.
Date of creation: 01 Jun 2007
Date of revision:
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Other versions of this item:
- Neil Bania & Joe A. Stone, 2008. "Ranking state fiscal structures using theory and evidence," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(4), pages 751-770.
- Joe A. Stone & Neil Bania, 2008. "Ranking State Fiscal Structures using Theory and Evidence," University of Oregon Economics Department Working Papers 2008-6, University of Oregon Economics Department.
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H4 - Public Economics - - Publicly Provided Goods
- H7 - Public Economics - - State and Local Government; Intergovernmental Relations
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
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