Budget Volatility and Economic Base Composition in Local Governments

Michael R. Overton and Robert L. (Bob) Bland

Municipal Finance Journal, 2022, vol. 43, issue 1, 1 - 23

Abstract: Budget volatility—the difference between expected and actual revenues and expenditures—is a critical component to sustaining a local government’s fiscal health. Although scholars have examined many determinants of budget volatility, less understood is the effect of a local government’s economy—the composition of its economic base—on budget volatility. To fill this gap, this article uses panel data methods to test the impact of a city’s economic base on budget volatility. The results suggest that industrial diversification has no impact on budget stability but that certain industrial clusters do generally promote budget stability.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:munifj:doi:10.1086/mfj43010001

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