US State Fiscal Policy and Natural Resources

Alexander James

American Economic Journal: Economic Policy, 2015, vol. 7, issue 3, 238-57

Abstract: An analytical framework predicts that, in response to an exogenous increase in resource-based government revenue, a benevolent government will partially substitute away from taxing income, increase spending and save. Fifty-one years of US-state level data are largely consistent with this theory. A baseline fixed effects model predicts that a $1.00 increase in resource revenue results in a $0.25 decrease in nonresource revenue, a $0.43 increase in spending and a $0.32 increase in savings. Instrumenting for resource revenue reveals that a positive revenue shock is largely saved and the rest is transferred back to residents in the form of lower non resource tax rates. (JEL H71, H72, H76, Q38, R11)

JEL-codes: H71 H72 H76 Q38 R11 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/pol.20130211
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Citations: View citations in EconPapers (52)

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Related works:
Working Paper: U.S. State Fiscal Policy and Natural Resources (2014)
Working Paper: U.S. State Fiscal Policy and Natural Resources (2013)
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