Budget spillovers and fiscal policy interdependence. Evidence from the states

Anne C. Case, Harvey S. Rosen, James R. Hines

Research output: Contribution to journalArticle

589 Scopus citations

Abstract

This paper formalizes and tests the notion that states' expenditures depend on the spending of similarly situated states. We find that even after allowing for fixed state effects, year effects, and common random shocks among neighbors, a state government's level of per capita expenditure is positively and significantly affected by the expenditure levels of its neighbors. Ceteris paribus, a one dollar increase in a state's neighbors' expenditures increases its own expenditure by over 70 cents.

Original languageEnglish (US)
Pages (from-to)285-307
Number of pages23
JournalJournal of Public Economics
Volume52
Issue number3
DOIs
StatePublished - Oct 1993

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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