Evaluating state tax revenue variability: a portfolio approach

Thomas Garrett

Applied Economics Letters, 2009, vol. 16, issue 3, 243-246

Abstract: This article develops a volatility model based on portfolio theory to examine state tax revenue variability. Unlike traditional parametric methods used to analyse state tax revenue variability, the portfolio approach allows the computation of a tax's share of total tax revenue that minimizes the overall variability in total state tax revenue given a state's portfolio of tax revenue sources. The model can thus be used to evaluate how closely a state's revenue portfolio is constructed to minimize variability in total state tax revenue. An empirical application of the model is conducted on a sample of US states. The volatility model presented here serves as a useful complement to parametric techniques that have been used to estimate tax revenue variability.

Date: 2009
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Citations: View citations in EconPapers (6)

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Working Paper: Evaluating state tax revenue variability: a portfolio approach (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:16:y:2009:i:3:p:243-246

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DOI: 10.1080/13504850601018403

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