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Trade Shocks and the Provision of Local Public Goods

Author

Listed:
  • Leo Feler
  • Mine Z. Senses

Abstract

We analyze the impact of trade-induced income shocks on the size of local government and the provision of public services. Areas in the United States with declining labor demand and incomes due to increasing import competition from China experience relative declines in housing prices and business activity. Since local governments are disproportionately funded through property and sales taxation, declining property values and a decrease in economic activity translate into less revenue, which constrains the ability of local governments to provide public services. State and federal governments have limited ability to smooth local shocks, and the impact on the provision of public services is compounded when local income shocks are highly correlated with shocks in the rest of the state. The outcome is a relative decline not only in incomes but also in the quality of public services and amenities in trade exposed localities.

Suggested Citation

  • Leo Feler & Mine Z. Senses, 2017. "Trade Shocks and the Provision of Local Public Goods," American Economic Journal: Economic Policy, American Economic Association, vol. 9(4), pages 101-143, November.
  • Handle: RePEc:aea:aejpol:v:9:y:2017:i:4:p:101-43
    Note: DOI: 10.1257/pol.20150578
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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • 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)
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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