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Budget Rules and State Business Cycles*

* This paper is a replication of an original study

Author

Listed:
  • Robert Krol

    (California State University, Northridge, robert.krol@csun.edu)

  • Shirley Svorny

    (California State University, Northridge)

Abstract

Levinson (1998) finds that large states with lenient balanced budget rules experience less cyclical variability. He concludes that state fiscal policy works. However, Levinson's finding is not robust to alternative methods of detrending the data. In addition, the 1984 Advisory Commission on Intergovernmental Relations (ACIR) analysis of state budget rules used by Levinson (and other researchers) is of questionable merit. Reestimation of Levinson's regressions using budget rule classifications in a U.S. General Accounting Office (GAO) study reverses his result. The results from this study suggest that existing empirical work using the ACIR index should be revisited.

Suggested Citation

  • Robert Krol & Shirley Svorny, 2007. "Budget Rules and State Business Cycles," Public Finance Review, , vol. 35(4), pages 530-544, July.
    • Handle: RePEc:sae:pubfin:v:35:y:2007:i:4:p:530-544
    DOI: 10.1177/1091142106295761
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    References listed on IDEAS

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    Cited by:

    1. Joe A. Stone, 2016. "Do Balanced-Budget Rules Increase Growth?," Bulletin of Economic Research, Wiley Blackwell, vol. 68(1), pages 79-89, January.
    2. Minjie Deng and Chang Liu, 2024. "Public Financing Under Balanced Budget Rules," Discussion Papers dp24-04, Department of Economics, Simon Fraser University.
    3. Guillaume Blanc and Masahiro Kubo, 2026. "The Making of France," Discussion Papers dp26-04, Department of Economics, Simon Fraser University.
    4. Sounman Hong & Daniel Nadler, 2016. "The impact of political institutions on U.S. state bond yields during crises: evidence from the 2008 credit market seizure," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 19(1), pages 77-89, March.
    5. Gerasimos T. Soldatos, 2021. "In/Estabilidad bajo el impuesto sobre la renta ideal y el impuesto sobre el consumo ideal," Cuadernos de Economía - Spanish Journal of Economics and Finance, Asociación Cuadernos de Economía, vol. 44(124), pages 33-42, Enero.
    6. Sounman Hong, 2015. "Fiscal Rules in Recessions," Public Finance Review, , vol. 43(4), pages 505-528, July.
    7. Burret, Heiko T. & Feld, Lars P., 2018. "(Un-)intended effects of fiscal rules," European Journal of Political Economy, Elsevier, vol. 52(C), pages 166-191.
    8. Potrafke, Niklas, 2025. "The economic consequences of fiscal rules," Journal of International Money and Finance, Elsevier, vol. 153(C).
    9. Jeffrey Clemens & Stephen Miran, 2012. "Fiscal Policy Multipliers on Subnational Government Spending," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 46-68, May.
    10. Minjie Deng & Chang Liu, 2025. "Public Financing Under Balanced Budget Rules," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 56, April.
    11. Clemens, Jeffrey, 2013. "State Fiscal Adjustment During Times of Stress: Possible Causes of the Severity and Composition of Budget Cuts," MPRA Paper 55921, University Library of Munich, Germany.
    12. Mahdavi, Saeid & Westerlund, Joakim, 2011. "Fiscal stringency and fiscal sustainability: Panel evidence from the American state and local governments," Journal of Policy Modeling, Elsevier, vol. 33(6), pages 953-969.

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    Replication

    This item is a replication of:
  • Levinson, Arik, 1998. "Balanced Budgets and Business Cycles: Evidence From the States," National Tax Journal, National Tax Association;National Tax Journal, vol. 51(4), pages 715-732, December.

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