US State Fiscal Policy and Natural Resources
AbstractAn analytical framework predicts that, in response to an exogenous increase in resource based government revenue, a benevolent government will partially substitute away from taxing income, increase spending and save. Forty-two years of U.S. state-level data are consistent with this theory. Specifically, a baseline fixed effects model predicts that a 1% point increase in resource revenue results in a .20% point decrease in non-resource revenue, a .50% point increase in spending and a .30% point increase in savings. These results are generally robust to alternative model specifications and the instrumentation of resource-based government revenue. Interaction effects reveal some asymmetry in the fiscal response to revenue shocks according to state political leanings.
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Bibliographic InfoPaper provided by Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford in its series OxCarre Working Papers with number 126.
Date of creation: 2014
Date of revision:
Severance Tax; Fiscal Policy; Natural Resources;
Other versions of this item:
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-02-21 (All new papers)
- NEP-PBE-2014-02-21 (Public Economics)
- NEP-PUB-2014-02-21 (Public Finance)
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