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Spatial Dependence in Models of State Fiscal Policy Convergence

Author

Listed:
  • Cletus C. Coughlin

    (Federal Reserve Bank of St. Louis, St. Louis, Missouri)

  • Thomas A. Garrett

    (Federal Reserve Bank of St. Louis, St. Louis, Missouri)

  • Rubén Hernández-Murillo

    (Federal Reserve Bank of St. Louis, St. Louis, Missouri)

Abstract

We apply spatial econometric techniques to models of state and local fiscal policy convergence. Our work extends the work of Scully and Annala in much the same way that Rey and Montouri extended the literature on income convergence among U.S. states. Our results indicate that most fiscal policies have been converging and that the growth paths of state and local fiscal policies are not independent. In addition, we find that total expenditures have been converging faster than output, whereas total tax revenues have been converging slower than output. Our models further demonstrate that state expenditure growth is dependent on expenditure growth in economically and demographically similar states, while output growth and revenue growth in a state are dependent on output growth and revenue growth, respectively, in contiguous states.

Suggested Citation

  • Cletus C. Coughlin & Thomas A. Garrett & Rubén Hernández-Murillo, 2007. "Spatial Dependence in Models of State Fiscal Policy Convergence," Public Finance Review, , vol. 35(3), pages 361-384, May.
  • Handle: RePEc:sae:pubfin:v:35:y:2007:i:3:p:361-384
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    References listed on IDEAS

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    Cited by:

    1. Daechang Kang, 2010. "The Effect of Public Capital on the Productivity - An Analysis on the U.S. Highway Stock," Korean Economic Review, Korean Economic Association, vol. 26, pages 177-201.
    2. Sandhya Garg, 2015. "Spatial convergence in public expenditure across Indian states: Implication of federal transfers," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2015-028, Indira Gandhi Institute of Development Research, Mumbai, India.
    3. Gyawali, Buddhi Raj & Fraser, Rory & Banerjee, Ban & Bukenya, James O., 2009. "Income Convergence and Growth in Alabama: Evidence from Sub-county Level Data," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46713, Southern Agricultural Economics Association.
    4. repec:spr:empeco:v:53:y:2017:i:2:d:10.1007_s00181-016-1123-3 is not listed on IDEAS

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