Trade Shocks and the Provision of Local Public Goods

Leo Feler () and Mine Zeynep Senses ()
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Leo Feler: Johns Hopkins University
Mine Zeynep Senses: Johns Hopkins University

No 10231, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We analyze the impact of trade-induced income shocks on the size of local government, and the provision of public services. Areas in the US with declining labor demand and incomes due to increasing import competition from China experience relative declines in housing prices and business activity. Since local governments are disproportionately funded through property and sales taxation, declining property values and a decrease in economic activity translate into less revenue, which constrains the ability of local governments to provide public services. State and federal governments have limited ability to smooth local shocks, and the impact on the provision of public services is compounded when local income shocks are highly correlated with shocks in the rest of the state. The outcome is greater inequality not only in incomes but also in the quality of public services and amenities across US jurisdictions.

Keywords: public goods; public finance; intergovernmental transfers; housing prices; trade shocks (search for similar items in EconPapers)
JEL-codes: F14 F16 H41 H70 R12 R23 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2016-09
New Economics Papers: this item is included in nep-geo, nep-int, nep-pub and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published - published in: American Economic Review: Economic Policy, 2017, 9 (4), 101 - 143

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