IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Redistribution at the State and Local Level: Consequences for Economic Growth

Listed author(s):
  • Howard Chernick

    (Department of Economics, Hunter College, New York, NY, USA,

Registered author(s):

    Fiscal redistribution varies substantially across U.S. states, both on the tax and spending side. A compensating differential framework is used to show that greater redistribution will tend to increase the gross wage of skilled workers but that any increase could be offset by stronger preferences for redistribution. An increase in gross wages raises the cost of output in the more redistributive state, leading to a predicted decline in income and output. To test the model, five- and ten-year per capita and aggregate growth rates are estimated as a function of initial measures of tax and expenditure incidence. Data are a four-period panel of U.S. states from 1977 to 1995. Tax progressivity is measured both overall and for the income tax alone. Expenditure progressivity is measured by spending on welfare and higher education, and the state share of elementary and secondary education spending. Tax structure and welfare spending are instrumented. State tax progressivity shows no effect on growth. Welfare spending has a negative effect on aggregate income growth but not on per capita income. Higher education spending is unrelated to growth. Fiscal spillovers within regions are asymmetric. Progressive taxation and more higher education spending by a state’s geographic neighbors have positive effects on own-state growth. The asymmetry in tax effects explains why interstate tax competition does not lead to geographic convergence in fiscal structures. The results suggest that interstate differences in fiscal redistribution are welfare enhancing in the Pareto sense.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Article provided by in its journal Public Finance Review.

    Volume (Year): 38 (2010)
    Issue (Month): 4 (July)
    Pages: 409-449

    in new window

    Handle: RePEc:sae:pubfin:v:38:y:2010:i:4:p:409-449
    Contact details of provider:

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:38:y:2010:i:4:p:409-449. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SAGE Publications)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.