Budget spillovers and fiscal policy interdependence. Evidence from the states

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

doi:10.1016/0047-2727(93)90036-S

Budget spillovers and fiscal policy interdependence. Evidence from the states

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

Economics

Research output: Contribution to journal › Article › peer-review

808 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 language	English (US)
Pages (from-to)	285-307
Number of pages	23
Journal	Journal of Public Economics
Volume	52
Issue number	3
DOIs	https://doi.org/10.1016/0047-2727(93)90036-S
State	Published - Oct 1993

All Science Journal Classification (ASJC) codes

Finance
Economics and Econometrics

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10.1016/0047-2727(93)90036-S

Cite this

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title = "Budget spillovers and fiscal policy interdependence. Evidence from the states",

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.",

author = "Case, \{Anne C.\} and Rosen, \{Harvey S.\} and Hines, \{James R.\}",

note = "Funding Information: 08544, USA. *We are grateful to James Poterba, Douglas Holtz-Eakin, Robert Inman, Gilbert Metcalf, an anonymous referee, and seminar participants at Berkeley, Baruch, Carnegie Mellon, Harvard, L.S.E., M.I.T., Michigan and Rutgers for useful suggestions. This is a significantly revised version of an earlier paper [Case et al. (1989)]. Marlon Boarnet, John Capeci and Dean Jolliffe provided exemplary research assistance. This research was supported in part by the NBER Project on State and Local Government Finance, and in part by a grant from the Olin Foundation to Princeton University. {\textquoteleft}Appleborne (1989, p. L26).",

year = "1993",

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doi = "10.1016/0047-2727(93)90036-S",

language = "English (US)",

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AU - Rosen, Harvey S.

AU - Hines, James R.

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N2 - 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.

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Budget spillovers and fiscal policy interdependence. Evidence from the states

Abstract

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