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

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  • Marco Bassetto
  • Leslie McGranahan

Abstract

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.

Suggested Citation

  • Marco Bassetto & Leslie McGranahan, 2009. "On the relationship between mobility, population growth, and capital spending in the United States," Working Paper Series WP-09-25, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhwp:wp-09-25
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    References listed on IDEAS

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    4. Ruediger Bachmann & Jinhui Bai, 2013. "Politico-Economic Inequality and the Comovement of Government Purchases," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(4), pages 565-580, October.
    5. Barseghyan, Levon & Battaglini, Marco & Coate, Stephen, 2013. "Fiscal policy over the real business cycle: A positive theory," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2223-2265.
    6. Jordan Rappaport, 1999. "Local Growth Empirics," CID Working Papers 23A, Center for International Development at Harvard University.
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    12. Marco Bassetto, 2006. "Politics and Efficiency of Separating Capital and Ordinary Government Budgets," The Quarterly Journal of Economics, Oxford University Press, vol. 121(4), pages 1167-1210.
    13. Marco Bassetto, 2008. "Public investment and budget rules for state vs. local governments," Working Paper Series WP-08-21, Federal Reserve Bank of Chicago.
    14. Paul Klein & Per Krusell & José-Víctor Ríos-Rull, 2008. "Time-Consistent Public Policy," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 789-808.
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    Cited by:

    1. Marina Azzimonti, 2015. "The dynamics of public investment under persistent electoral advantage," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 653-678, July.
    2. Giuseppe Bertola, 2011. "The Role of the State in Society - Government vs. Citizen Responsibility," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(3), pages 32-37, December.
    3. Busilac, Aileen Jean & Deluna, Roperto Jr, 2013. "The Relationship between Population Dynamics and Investments for Energy and Telecommunication Infrastructures in the Philippines," MPRA Paper 51845, University Library of Munich, Germany.
    4. Holmes, Thomas J. & Ohanian, Lee E., 2014. "Pay with Promises or Pay as You Go? Lessons from the Death Spiral of Detroit," Staff Report 501, Federal Reserve Bank of Minneapolis.
    5. Marina Azzimonti, 2015. "The dynamics of public investment under persistent electoral advantage," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 653-678, July.

    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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