US State Fiscal Policy and Natural Resources
AbstractAn analytical framework predicts that, in response to an exogenous increase in resourcebased 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 University of Oxford, Department of Economics in its series Economics Series Working Papers with number OxCarre Research Paper 126.
Date of creation: 14 Oct 2013
Date of revision:
Severance Tax; Fiscal Policy; Natural Resources;
Find related papers by JEL classification:
- Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
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