Modeling the Louisiana Local Government Fiscal Module in a Disequilibrium Environment: A Modified COMPAS Model Approach

Arun Adhikari () and J. Matthew Fannin

Journal of Regional Analysis and Policy, 2013, vol. 43, issue 2

Abstract: Abstract. The objective of this study is to assess and measure the relative forecasting performance of local government expenditures in Community Policy Analysis Models (COMPAS) during periods of supply/demand disequilibrium. We evaluate whether a fiscal module under the COMPAS framework (an equilibrium model) fits better under a disequilibrium economic en- vironment. We find that both a simple naïve model with one year lagged expenditure and a lagged expenditure model with revenue capacity variables significantly increased forecasting performance relative to the traditional supply/demand equilibrium model of the public sec- tor. We also found weak evidence suggesting that in cases where the equilibrium model is used in a cross-sectional setting, quantile regression may improve forecasting performance given the heterogeneity in the quantity and quality of preferences in public services.

Keywords: Consumer/Household Economics; Public Economics (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:jrapmc:243954

DOI: 10.22004/ag.econ.243954

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