The Crucible of Debt and Welfare Spending: Evidence from State-level Welfare Expenditures in the United States

Eloy Fisher

Review of Political Economy, 2015, vol. 27, issue 2, 201-217

Abstract: This paper argues that financial pressures affect state public welfare expenditures, controlling for economic effects, financial constraints faced by state administrations and general economic conditions. It develops a series of panel models for 17 states with the largest muni markets (representing 71 per cent of all state-level public welfare spending in the US or $326 billion) from 1998 to 2010. As economic conditions worsen, government revenues decline. Coupled with marginal increases in social spending, state governments face higher debt and binding budget constraints. As investors realize the situation, muni bond prices drop, yields increase and higher finance costs compel state governments to decrease expenditures. These cuts are generally focused on public welfare expenditures. Between 1998 and 2010, one percentage point increases in short (1y), medium (5y) and longer (10y) bonds yields are associated with 0.01 per cent, 0.03 per cent and 0.04 per cent decreases in public welfare expenditures relative to gross state output.

Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/09538259.2015.1012791 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:revpoe:v:27:y:2015:i:2:p:201-217

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CRPE20

DOI: 10.1080/09538259.2015.1012791

Access Statistics for this article

Review of Political Economy is currently edited by Steve Pressman and Louis-Philippe Rochon

More articles in Review of Political Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().