The Tax Spending Nexus: Evidence from a Panel of US State-Local Governments
We re-examine the tax-spending nexus using, for the first time, a panel of fifty US state-local government units over the period 1963-97 and panel techniques that allow for cross-sectional dependence. We find that, unlike tax revenues, expenditures adjust to revert back to a long-term equilibrium relationship. The evidence on the short-term dynamics is also consistent with the tax-and-spend hypothesis at the one percent level of significance. One implication of this finding is that the size of the government at the state-local level is not determined by expenditure demand, but rather by resource supply. This is consistent with the fact that many US state and local governments operate under constitutional or legislative limitations that seek to constrain deficits.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://business.utsa.edu/wps
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Payne, James E, 1998. " The Tax-Spend Debate: Time Series Evidence from State Budgets," Public Choice, Springer, vol. 95(3-4), pages 307-20, June.
- Deli, Daniel N. & Varma, Raj, 2002. "Closed-end versus open-end: the choice of organizational form," Journal of Corporate Finance, Elsevier, vol. 8(1), pages 1-27, January.
- Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1989.
"The Revenues-Expenditures Nexus: Evidence from Local Government Data,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 415-29, May.
- Douglas Holtz-Eakin & Whitney K. Newey & Harvey S. Rosen, 1987. "The Revenues-Expenditures Nexus: Evidence from Local Government Data," NBER Working Papers 2180, National Bureau of Economic Research, Inc.
- Tom Doan, . "RATS program to demonstrate IV estimation of VAR in panel data," Statistical Software Components RTZ00185, Boston College Department of Economics.
- Kevin D. Hoover & Steven M. Sheffrin, 1990.
"Causation, spending and taxes: sand in the sandbox or tax collector for the welfare state?,"
Federal Reserve Bank of San Francisco, issue Nov.
- Hoover, Kevin D & Sheffrin, Steven M, 1992. "Causation, Spending, and Taxes: Sand in the Sandbox or Tax Collector for the Welfare State?," American Economic Review, American Economic Association, vol. 82(1), pages 225-48, March.
- Hoover, K.D. & Sheffrin, S.M., 1990. "Causation, Spending And Taxes: Sand In The Sandbox Or Tax Collector For The Welfare State," Papers 67, California Davis - Institute of Governmental Affairs.
- Westerlund, Joakim, 2005.
"Testing for Error Correction in Panel Data,"
2005:11, Lund University, Department of Economics.
- Barclay, Michael J. & Holderness, Clifford G. & Pontiff, Jeffrey, 1993.
"Private benefits from block ownership and discounts on closed-end funds,"
Journal of Financial Economics,
Elsevier, vol. 33(3), pages 263-291, June.
- Barclay, M.J. & Holderness, C.G. & Pontiff, J., 1991. "Private Benefits form Block Ownership and Discounts on Closed-end Funds," Papers 91-01, Rochester, Business - Financial Research and Policy Studies.
- Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
- L. Vanessa Smith & Stephen Leybourne & Tae-Hwan Kim & Paul Newbold, 2004. "More powerful panel data unit root tests with an application to mean reversion in real exchange rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(2), pages 147-170.
- Rolf Larsson & Johan Lyhagen & Mickael Lothgren, 2001.
"Likelihood-based cointegration tests in heterogeneous panels,"
Royal Economic Society, vol. 4(1), pages 41.
- Larsson, Rolf & Lyhagen, Johan & Löthgren, Mickael, 1998. "Likelihood-Based Cointegration Tests in Heterogeneous Panels," SSE/EFI Working Paper Series in Economics and Finance 250, Stockholm School of Economics, revised 27 Aug 1998.
- Jushan Bai & Serena Ng, 2004.
"A PANIC Attack on Unit Roots and Cointegration,"
Econometric Society, vol. 72(4), pages 1127-1177, 07.
- Jushan Bai & Serena Ng, 2001. "A Panic Attack on Unit Roots and Cointegration," Economics Working Paper Archive 469, The Johns Hopkins University,Department of Economics.
- Jushan Bai & Serena Ng, 2001. "A PANIC Attack on Unit Roots and Cointegration," Boston College Working Papers in Economics 519, Boston College Department of Economics.
- Joulfaian, David & Mookerjee, Rajen, 1990. "The Intertemporal Relationship between State and Local Government Revenues and Expenditures: Evidence from OECD Countries," Public Finance = Finances publiques, , vol. 45(1), pages 109-17.
- Barro, Robert J., 1979.
"On the Determination of the Public Debt,"
3451400, Harvard University Department of Economics.
- James E. Payne, 2003. "A Survey of the International Empirical Evidence on the Tax-Spend Debate," Public Finance Review, , vol. 31(3), pages 302-324, May.
- Del Guercio, Diane & Dann, Larry Y. & Partch, M. Megan, 2003. "Governance and boards of directors in closed-end investment companies," Journal of Financial Economics, Elsevier, vol. 69(1), pages 111-152, July.
- Alan T. Peacock & Jack Wiseman, 1979. "Approaches To the Analysis of Government Expenditure Growth," Public Finance Review, , vol. 7(1), pages 3-23, January.
- Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
- Skidmore, Mark, 1999. " Tax and Expenditure Limitations and the Fiscal Relationships between State and Local Governments," Public Choice, Springer, vol. 99(1-2), pages 77-102, April.
When requesting a correction, please mention this item's handle: RePEc:tsa:wpaper:0045. 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: (Eddie Salinas)
If references are entirely missing, you can add them using this form.