Spatial Dependence in Models of State Fiscal Policy Convergence

Cletus Coughlin, Thomas Garrett and Rubén Hernández-Murillo
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Rubén Hernández-Murillo: Federal Reserve Bank of St. Louis, St. Louis, Missouri
Authors registered in the RePEc Author Service: Ruben Hernandez-Murillo

Public Finance Review, 2007, vol. 35, issue 3, 361-384

Abstract: We apply spatial econometric techniques to models of state and local fiscal policy convergence. Our work extends the work of Scully and Annala in much the same way that Rey and Montouri extended the literature on income convergence among U.S. states. Our results indicate that most fiscal policies have been converging and that the growth paths of state and local fiscal policies are not independent. In addition, we find that total expenditures have been converging faster than output, whereas total tax revenues have been converging slower than output. Our models further demonstrate that state expenditure growth is dependent on expenditure growth in economically and demographically similar states, while output growth and revenue growth in a state are dependent on output growth and revenue growth, respectively, in contiguous states.

Keywords: convergence; state fiscal policy; spatial econometrics; state government (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (5)

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Working Paper: Spatial dependence in models of state fiscal policy convergence (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:35:y:2007:i:3:p:361-384

DOI: 10.1177/1091142106295766

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