Fiscal Policy Multipliers on Subnational Government Spending
Balanced budget requirements lead to substantial pro-cyclicality in state government spending, with the stringency of a state's rules driving the pace at which it must adjust to shocks. We show that fiscal institutions can generate natural experiments in deficit-financed spending that are informative regarding fiscal stabilization policy. Alternative sources of variation in subnational fiscal policy often implicitly involve "windfall" financing, which precludes any effect of future debt or taxation on current consumption and investment. Consistent with a role for these "Ricardian" effects, our estimates are smaller than those in related studies, implying an on-impact multiplier below 1. (JEL C51, E32, E62, H72)
Volume (Year): 4 (2012)
Issue (Month): 2 (May)
|Contact details of provider:|| Web page: https://www.aeaweb.org/aej-policy|
More information through EDIRC
|Order Information:||Web: https://www.aeaweb.org/subscribe.html|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert Barro, 2011.
"Macroeconomic Effects from Government Purchases and Taxes,"
Annual Meeting Plenary
2011-1, Society for Economic Dynamics.
- Robert J. Barro & Charles J. Redlick, 2011. "Macroeconomic Effects From Government Purchases and Taxes," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 51-102.
- Robert J. Barro & Charles J. Redlick, 2009. "Macroeconomic Effects from Government Purchases and Taxes," NBER Working Papers 15369, National Bureau of Economic Research, Inc.
- Mountford, Andrew & Uhlig, Harald, 2002.
"What are the Effects of Fiscal Policy Shocks?,"
CEPR Discussion Papers
3338, C.E.P.R. Discussion Papers.
- Mountford, A.W. & Uhlig, H.F.H.V.S., 2002. "What are the Effects of Fiscal Policy Shocks?," Discussion Paper 2002-31, Tilburg University, Center for Economic Research.
- Andrew Mountford & Harald Uhlig, 2005. "What are the Effects of Fiscal Policy Shocks?," SFB 649 Discussion Papers SFB649DP2005-039, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Andrew Mountford & Harald Uhlig, 2008. "What are the Effects of Fiscal Policy Shocks?," NBER Working Papers 14551, National Bureau of Economic Research, Inc.
- Alan J. Auerbach & William G. Gale, 2009.
"Activist Fiscal Policy to Stabilize Economic Activity,"
NBER Working Papers
15407, National Bureau of Economic Research, Inc.
- Alan J. Auerbach & William G. Gale, 2009. "Activist fiscal policy to stabilize economic activity," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 327-374.
- James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
- Mollerstrom, Johanna Britta & Laibson, David I. & Chauvin, Kyle, 2011.
"Asset Bubbles and the Cost of Economic Fluctuations,"
9938146, Harvard University Department of Economics.
- Kyle Chauvin & David Laibson & Johanna Mollerstrom, 2011. "Asset Bubbles and the Cost of Economic Fluctuations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 233-260, 08.
- Lauren Cohen & Joshua D. Coval & Christopher Malloy, 2010. "Do Powerful Politicians Cause Corporate Downsizing?," NBER Working Papers 15839, National Bureau of Economic Research, Inc.
- Barro, Robert J., 1974.
"Are Government Bonds Net Wealth?,"
3451399, Harvard University Department of Economics.
- Poterba, James M. & Rueben, Kim S., 2001. "Fiscal News, State Budget Rules, and Tax-Exempt Bond Yields," Journal of Urban Economics, Elsevier, vol. 50(3), pages 537-562, November.
- Arik Levinson, 2007. "Budget Rules and State Business Cycles," Public Finance Review, , vol. 35(4), pages 545-549, July.
- Olivier Blanchard & Roberto Perotti, 2002.
"An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 117(4), pages 1329-1368.
- Olivier Blanchard & Roberto Perotti, 1999. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," NBER Working Papers 7269, National Bureau of Economic Research, Inc.
- Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle, November.
- Alan J. Auerbach & Yuriy Gorodnichenko, 2012.
"Measuring the Output Responses to Fiscal Policy,"
American Economic Journal: Economic Policy,
American Economic Association, vol. 4(2), pages 1-27, May.
- Robert Krol & Shirley Svorny, 2007. "Budget Rules and State Business Cycles," Public Finance Review, , vol. 35(4), pages 530-544, July.
- Levinson, Arik, 1998. "Balanced Budgets and Business Cycles: Evidence from the States," National Tax Journal, National Tax Association, vol. 51(n. 4), pages 715-32, December.
- Jaeger, Albert, 1994. "Mechanical Detrending by Hodrick-Prescott Filtering: A Note," Empirical Economics, Springer, vol. 19(3), pages 493-500.
This item is featured on the following reading lists or Wikipedia pages:
- Fiscal Policy Multipliers on Subnational Government Spending (AEJ:EP 2012) in ReplicationWiki
When requesting a correction, please mention this item's handle: RePEc:aea:aejpol:v:4:y:2012:i:2:p:46-68. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros)or (Michael P. Albert)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.