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Two Tales of Two U.S. States: Regional Fiscal Austerity and Economic Performance

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  • Rickman, Dan S.
  • Wang, Hongbo

Abstract

The recent fiscal austerity experiments undertaken in the states of Kansas and Wisconsin have generated considerable policy interest. Using a variety of identification approaches within a difference-in-differences framework and examining a wide range of economic indicators, this paper assesses whether the experiments have spurred growth in the states as promised by the governors and legislatures which enacted them into law. The overall conclusion from the paper is that the fiscal experiments did not spur growth, and if anything, harmed state economic performance. Among the identification approaches used, the Synthetic Control Method (Abadie and Gardeazabal 2003; Abadie et al., 2010) is demonstrated to provide the most compelling evidence.

Suggested Citation

  • Rickman, Dan S. & Wang, Hongbo, 2017. "Two Tales of Two U.S. States: Regional Fiscal Austerity and Economic Performance," MPRA Paper 79615, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:79615
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    References listed on IDEAS

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    Cited by:

    1. Klaus Gründler & Niklas Potrafke, 2019. "Ideologically-charged terminology: austerity, fiscal consolidation, and sustainable governance," CESifo Working Paper Series 7613, CESifo.
    2. Rickman, Dan & Wang, Hongbo, 2020. "Lights, Camera, What Action? The Nascent Literature on the Economics of US State Film Incentives," MPRA Paper 104477, University Library of Munich, Germany.
    3. Rickman, Dan & Wang, Hongbo, 2020. "What goes up must come down? The recent economic cycles of the four most oil and gas dominated states in the US," Energy Economics, Elsevier, vol. 86(C).
    4. Craig Wesley Carpenter & Anders Van Sandt & Scott Loveridge, 2022. "Measurement error in US regional economic data," Journal of Regional Science, Wiley Blackwell, vol. 62(1), pages 57-80, January.
    5. Tang, Meng-Chi & Huang, Ya-Wei, 2022. "The effect of endogenous campaign spending and voter heterogeneity on candidates' vote share: Empirical evidence from Taiwanese local elections," Economic Modelling, Elsevier, vol. 114(C).
    6. Timothy M. Komarek, 2020. "State‐level austerity, education, and large urban labor markets: Evidence from fiscal policy experiments in Kansas and Wisconsin," Growth and Change, Wiley Blackwell, vol. 51(2), pages 556-583, June.

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    More about this item

    Keywords

    Fiscal austerity; State taxes; Synthetic Control Method;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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