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Social sector expenditures and rainy-day funds

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  • Gonzalez, Christian Y.
  • Paqueo, Vicente B.

Abstract

Gonzalez and Paqueo examine the effects of budget stabilization funds--often called rainy-day funds--on the volatility of social spending and, for contrast, on nonsocial sector spending. They analyze the rainy-day funds of U.S. states. The authors find that rainy-day funds are ineffective in reducing the volatility of nonsocial sector expenditures but are effective in reducing the volatility of social sector expenditures. The authors also find that states that have stringent deposit and withdrawal rules have higher rainy-day fund balances, and thus are more effective in reducing the volatility of social sector expenditures. Finally, for long-term effectiveness, stabilization funds depend obviously on sustained economic growth.

Suggested Citation

  • Gonzalez, Christian Y. & Paqueo, Vicente B., 2003. "Social sector expenditures and rainy-day funds," Policy Research Working Paper Series 3131, The World Bank.
    • Handle: RePEc:wbk:wbrwps:3131
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    References listed on IDEAS

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    3. Knight, Brian & Levinson, Arik, 1999. "Rainy Day Funds and State Government Savings," National Tax Journal, National Tax Association, vol. 52(n. 3), pages 459-72, September.
    4. Levinson, Arik, 1998. "Balanced Budgets and Business Cycles: Evidence from the States," National Tax Journal, National Tax Association, vol. 51(n. 4), pages 715-32, December.
    5. Bohn, Henning & Inman, Robert P., 1996. "Balanced-budget rules and public deficits: evidence from the U.S. states," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 13-76, December.
    6. Mr. Ugo Fasano-Filho, 2000. "Review of the Experience with Oil Stabilization and Savings Funds in Selected Countries," IMF Working Papers 2000/112, International Monetary Fund.
    7. Poterba, James M, 1994. "State Responses to Fiscal Crises: The Effects of Budgetary Institutions and Politics," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 799-821, August.
    8. Henning Bohn & Robert P. Inman, "undated". "Balanced Budget Rules and Public Deficits: Evidence from the U.S. States (Reprint 060)," Rodney L. White Center for Financial Research Working Papers 10-96, Wharton School Rodney L. White Center for Financial Research.
    9. Gary Wagner & Russell Sobel, 2006. "State budget stabilization fund adoption: Preparing for the next recession or circumventing fiscal constraints?," Public Choice, Springer, vol. 126(1), pages 177-199, January.
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    Cited by:

    1. Fatas, Antonio & Mihov, Ilian, 2006. "The macroeconomic effects of fiscal rules in the US states," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 101-117, January.
    2. Timothy J. Goodspeed, 2022. "Coping with extreme events: On solving decentralized budgetary crises," Working Papers. Collection A: Public economics, governance and decentralization 2210, Universidade de Vigo, GEN - Governance and Economics research Network.
    3. Sungyoon Lee & Jennifer Dodge & Gang Chen, 2022. "The cost of social vulnerability: an integrative conceptual framework and model for assessing financial risks in natural disaster management," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 114(1), pages 691-712, October.

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