Fiscal Centralization: Theory and Evidence from the Great Depression

Daniele Coen-Pirani and Michael Wooley

American Economic Journal: Economic Policy, 2018, vol. 10, issue 2, 39-61

Abstract: The Great Depression produced a profound and lasting influence on the structure of US government. This paper studies theoretically and empirically the increased centralization of revenues and expenditures by the states relative to local governments during this period. A model of property and sales taxation and tax delinquency is introduced. In the model, the income decline of the Depression causes a rise in property tax delinquency and leads to a shift toward sales taxation and fiscal centralization by the states. Empirical evidence based on cross-state variation in the severity of the Depression is consistent with the model's key predictions.

JEL-codes: E32 H25 H71 H72 H77 N12 N42 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/pol.20150131
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Citations: View citations in EconPapers (7)

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Working Paper: Fiscal Centralization: Theory and Evidence from the Great Depression (2016)
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