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Intergovernmental transfers and procyclical public spending

  • Abbott, Andrew
  • Jones, Philip
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    This paper tests the predictions that (i) sub-central government expenditures are procyclical and (ii) sub-central government expenditures are likely to be more procyclical than central government spending. The predictions are based on the importance of ‘voracity effects’ and on the proposition that they are systematically more pervasive if spending is financed by intergovernmental transfers. Evidence from 23 OECD countries between 1995 and 2006 indicates that sub-central government spending is more procyclical than central government expenditure.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0165176511006276
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    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 115 (2012)
    Issue (Month): 3 ()
    Pages: 447-451

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    Handle: RePEc:eee:ecolet:v:115:y:2012:i:3:p:447-451
    Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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    1. Philip R. Lane, 2002. "The Cyclical Behaviour of Fiscal Policy: Evidence from the OECD," Trinity Economics Papers 20022, Trinity College Dublin, Department of Economics.
    2. Alberto Alesina & Guido Tabellini, 2005. "Why Is Fiscal Policy Often Procyclical?," Working Papers 297, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    3. Dougan, William R & Kenyon, Daphne A, 1988. "Pressure Groups and Public Expenditures: The Flypaper Effect Reconsidered," Economic Inquiry, Western Economic Association International, vol. 26(1), pages 159-70, January.
    4. Ilzetzki, Ethan, 2011. "Rent-seeking distortions and fiscal procyclicality," Journal of Development Economics, Elsevier, vol. 96(1), pages 30-46, September.
    5. Brennan,Geoffrey & Buchanan,James M., 1980. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521233293, November.
    6. Riccardo Fiorito, 1997. "Stylized Facts of Government Finance in the G-7," IMF Working Papers 97/142, International Monetary Fund.
    7. Sørensen, Bent E & Yosha, Oved, 1999. "Output Fluctuations and Fiscal Policy: US State and Local Governments 1978-1994," CEPR Discussion Papers 2286, C.E.P.R. Discussion Papers.
    8. Daniel Bergvall & Claire Charbit & Dirk-Jan Kraan & Olaf Merk, 2006. "Intergovernmental Transfers and Decentralised Public Spending," OECD Working Papers on Fiscal Federalism 3, OECD Publishing.
    9. Jaejoon Woo, 2009. "Why Do More Polarized Countries Run More Procyclical Fiscal Policy?," The Review of Economics and Statistics, MIT Press, vol. 91(4), pages 850-870, November.
    10. Lane, Philip R & Tornell, Aaron, 1996. "Power, Growth, and the Voracity Effect," Journal of Economic Growth, Springer, vol. 1(2), pages 213-41, June.
    11. ,, 2009. "Public Finance and Public Choice: Analytical Perspectives," OUP Catalogue, Oxford University Press, edition 3, number 9780199234783, May.
    12. repec:idb:brikps:6797 is not listed on IDEAS
    13. Talvi, Ernesto & Vegh, Carlos A., 2005. "Tax base variability and procyclical fiscal policy in developing countries," Journal of Development Economics, Elsevier, vol. 78(1), pages 156-190, October.
    14. Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, number 9780521894753, November.
    15. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
    16. Michael Gavin & Ricardo Hausmann & Roberto Perotti & Ernesto Talvi, 1996. "Managing Fiscal Policy in Latin America and the Caribbean: Volatility, Procyclicality, and Limited Creditworthiness," Research Department Publications 4032, .
    17. James R. Hines & Richard H. Thaler, 1995. "The Flypaper Effect," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 217-226, Fall.
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