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Interstate Differences in Per Capita State and Local Revenues and The Neighboring State Effect


  • Kevin J. Murphy

    (Oakland University)

  • Oded Izraeli

    (Oakland University)


This paper examines cross-state differences in the responsiveness of per capita state and local revenues to changes in factors that determine these revenues. Our model proceeds from two intuitive points of departure. First, because of differing tastes and attitudes among the population toward public goods and services, states should respond differently to underlying determinants of per capita revenues. Second, though states differ generally from one another, groups or pockets of states may behave in a similar fashion because of what the literature has come to refer to as the neighboring state effect. Our data cover the period 1960 to 1992. The econometric results indicate that states differ in their response to changes in underlying revenue determinants. We also find, however, that some states exhibit a considerable degree of neighboring state behavior, particularly in the New England, West North Central, West South Central, and Mountain regions.

Suggested Citation

  • Kevin J. Murphy & Oded Izraeli, 1997. "Interstate Differences in Per Capita State and Local Revenues and The Neighboring State Effect," The Review of Regional Studies, Southern Regional Science Association, vol. 27(2), pages 101-121, Fall.
  • Handle: RePEc:rre:publsh:v:27:y:1997:i:2:p:101-121

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    References listed on IDEAS

    1. Mieszkowski, Peter & Stein, Robert M., 1983. "Trends and prospects in state and local finance," Journal of Urban Economics, Elsevier, vol. 14(2), pages 224-241, September.
    2. Anne C. Case & James R. Hines, Jr. & Harvey S. Rosen, 1989. "Copycatting: Fiscal Policies of States and Their Neighbors," NBER Working Papers 3032, National Bureau of Economic Research, Inc.
    3. Oates, Wallace E, 1985. "Searching for Leviathan: An Empirical Study," American Economic Review, American Economic Association, vol. 75(4), pages 748-757, September.
    4. William J. Hunter & Charles E. Scott, 1986. "Interstate Differences in Individual Income Taxes," Public Finance Review, , vol. 14(1), pages 69-85, January.
    5. Murphy, Kevin J & Hofler, Richard A, 1984. "Determinants of Geographic Unemployment Rates: A Selectively Pooled-Simultaneous Model," The Review of Economics and Statistics, MIT Press, vol. 66(2), pages 216-223, May.
    6. repec:fth:harver:1437 is not listed on IDEAS
    7. Frank Brechling, 1967. "Trends And Cycles In British Regional Unemployment," Oxford Economic Papers, Oxford University Press, vol. 19(1), pages 1-21.
    8. Robert M. Fearn, 1975. "Cyclical, Seasonal, and Structural Factors in Area Unemployment Rates," ILR Review, Cornell University, ILR School, vol. 28(3), pages 424-431, April.
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    Cited by:

    1. Luna, LeAnn & Bruce, Donald J. & Hawkins, Richard R., 2007. "Maxing Out: An Analysis of Local Option Sales Tax Rate Increases," National Tax Journal, National Tax Association;National Tax Journal, vol. 60(1), pages 45-63, March.

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