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Asymmetric and Non-Linear Adjustments in Local Fiscal Policy

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  • Gabriella Deborah Legrenzi

Abstract

We analyse the revenue-expenditure patterns of local governments, allowing for asymmetric and non-linear adjustments of local spending and taxation to disequilibrium errors. Our results provide evidence of a downward inflexibility of both local government spending and local taxation, pointing to a budget-maximising local government.

Suggested Citation

  • Gabriella Deborah Legrenzi, 2009. "Asymmetric and Non-Linear Adjustments in Local Fiscal Policy," CESifo Working Paper Series 2550, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_2550
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    References listed on IDEAS

    as
    1. Roemer, John E & Silvestre, Joaquim, 2002. " The "Flypaper Effect" Is Not an Anomaly," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(1), pages 1-17.
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    5. Stine, William F., 1994. "Is Local Government Revenue Response to Federal Aid Symmetrical? Evidence from Pennsylvania County Governments in a Era of Retrenchment," National Tax Journal, National Tax Association, vol. 47(4), pages 799-816, December.
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    More about this item

    Keywords

    fiscal federalism; fly-paper effect; non-linear time-series; asymmetric adjustment;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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