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On the relationship between mobility, population growth, and capital spending in the United States

  • Marco Bassetto
  • Leslie McGranahan

In this paper, we assess the empirical relationship between population growth, mobility, and state-level capital spending in the United States. To evaluate the magnitude of the coefficients, we introduce an explicit, quantitative political-economy model of government spending determination, where mobility and population growth generate departures from Ricardian equivalence. Our estimates find strong responses in the level of capital provision per capita to these demographic movements; in fact, the resulting coefficients are stronger than the model delivers. Regression coefficients on population growth and mobility also yield opposite implications for the direction to which spending is distorted by the political-economy friction, posing a further challenge.

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Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-09-25.

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Date of creation: 2009
Date of revision:
Handle: RePEc:fip:fedhwp:wp-09-25
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  1. Timothy Besley & Torsten Persson & Daniel M. Sturm, 2010. "Political Competition, Policy and Growth: Theory and Evidence from the United States," CEP Discussion Papers dp1009, Centre for Economic Performance, LSE.
  2. Marco Bassetto & Vadym Lepetyuk, 2007. "Government investment and the European stability and growth pact," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 33-43.
  3. repec:tpr:qjecon:v:121:y:2006:i:4:p:1167-1210 is not listed on IDEAS
  4. Marco Battaglini & Steve Coate, 2006. "A Dynamic Theory of Public Spending, Taxation and Debt," Levine's Bibliography 122247000000001094, UCLA Department of Economics.
  5. Thomas J. Sargent & Marco Bassetto, 2004. "Politics and Efficiency of Separating Capital and Ordinary Government Budgets," 2004 Meeting Papers 3, Society for Economic Dynamics.
  6. Jordan Rappaport, 1999. "Local Growth Empirics," CID Working Papers 23, Center for International Development at Harvard University.
  7. Marina Azzimonti, 2009. "Barriers to investment in polarized societies," 2009 Meeting Papers 1233, Society for Economic Dynamics.
  8. Zheng Song, 2009. "Rotten Parents and Disciplined Children: A Politico-Economic Theory of Public Expenditure and Debt," 2009 Meeting Papers 94, Society for Economic Dynamics.
  9. Marco Battaglini & Stephen Coate, 2008. "Fiscal Policy over the Real Business Cycle: A Positive Theory," NBER Working Papers 14047, National Bureau of Economic Research, Inc.
  10. Marco Battaglini & Stephen Coate, 2005. "Inefficiency in Legislative Policy-Making: A Dynamic Analysis," NBER Working Papers 11495, National Bureau of Economic Research, Inc.
  11. Ruediger Bachmann & Jinhui Bai, 2010. "Government Purchases Over the Business Cycle: the Role of Economic and Political Inequality," NBER Working Papers 16247, National Bureau of Economic Research, Inc.
  12. Marco Bassetto, 2008. "Public investment and budget rules for state vs. local governments," Working Paper Series WP-08-21, Federal Reserve Bank of Chicago.
  13. Ross, Stephen & Yinger, John, 1999. "Sorting and voting: A review of the literature on urban public finance," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 47, pages 2001-2060 Elsevier.
  14. Marina, Azzimonti & Marco, Battaglini & Stephen, Coate, 2010. "On the Case for a Balanced Budget Amendment to the U.S. Constitution," MPRA Paper 25935, University Library of Munich, Germany.
  15. Paul Klein & Per Krusell & José-V�ctor R�os-Rull, 2008. "Time-Consistent Public Policy," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 789-808.
  16. Kennan,J. & Walker,J.R., 2003. "The effect of expected income on individual migration decisions," Working papers 7, Wisconsin Madison - Social Systems.
  17. repec:bla:restud:v:75:y:2008:i:3:p:789-808 is not listed on IDEAS
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