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Why is state and local government capital spending lower in the New England states than in other U.S. states?

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  • Ronald C. Fisher
  • Riley Sullivan

Abstract

This report explores several hypotheses as to why state and local governments in New England have been spending less on capital investment than the national average, on a normalized basis. Census data show that state and local capital spending in all six New England states was well below the national average between 2000 and 2012, whether measured on a per capita basis, as a share of personal income, or as a share of state and local government spending. To explore why this is so, this report considers how capital spending has changed over time, how capital spending differs by state and across spending category, and the quality and quantity of capital stock in New England?s states. The report also considers the relationship between debt issuance and capital spending. The authors find that economic, social, and political characteristics used in previous research are insufficient to fully explain the observed normalized levels of state and local capital spending in the New England states relative to their rates in the national average of all U.S. states. The report does suggest that the relatively large role of state government in New England and government officials? concerns about debt levels may have contributed to lower capital spending.

Suggested Citation

  • Ronald C. Fisher & Riley Sullivan, 2016. "Why is state and local government capital spending lower in the New England states than in other U.S. states?," New England Public Policy Center Policy Reports 16-1, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbpr:2016_001
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    References listed on IDEAS

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    1. Silva, Fabio & Sonstelie, Jon, 1995. "Did Serrano Cause a Decline in School Spending," National Tax Journal, National Tax Association, vol. 48(2), pages 199-215, June.
    2. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-1196, September.
    3. Ronald C. Fisher, 1997. "Effects of state and local public services on economic development," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 53-82.
    4. Silva, Fabio & Sonstelie, Jon, 1995. "Did Serrano Cause a Decline in School Spending," National Tax Journal, National Tax Association;National Tax Journal, vol. 48(2), pages 199-215, June.
    5. Poterba, James M., 1995. "Capital budgets, borrowing rules, and state capital spending," Journal of Public Economics, Elsevier, vol. 56(2), pages 165-187, February.
    6. Ronald C. Fisher & Robert W. Wassmer, 2015. "An Analysis of State–Local Government Capital Expenditure During the 2000s[We present]," Public Budgeting & Finance, Wiley Blackwell, vol. 35(1), pages 3-28, March.
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