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The Revenues-Expenditures Nexus: Evidence from Local Government Data

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  • Holtz-Eakin, Douglas
  • Newey, Whitney
  • Rosen, Harvey S

Abstract

This paper examines the intertemporal linkages between local government expenditures and revenues. The main results that emerge from an analysis of fiscal data from 171 municipal governments over the period 1972-80 are that (1) one or two years are sufficient to summarize the relevant dynamic interrelationships; (2) there are important intertemporal linkages between expenditures, taxes, and grants; and (3) past revenues help predict current expenditures, but past expenditures do not alter the future path of revenues. This last finding is contrary to results that have emerged from previous analyses of federal fiscal data. Copyright 1989 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1989. "The Revenues-Expenditures Nexus: Evidence from Local Government Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 415-429, May.
    • Handle: RePEc:ier:iecrev:v:30:y:1989:i:2:p:415-29
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    1. von Furstenberg, George M & Green, R Jeffrey & Jeong, Jin-Ho, 1986. "Tax and Spend, or Spend and Tax?," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 179-188, May.
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