Spatial dependence in models of state fiscal policy convergence

Cletus Coughlin, Thomas Garrett and Ruben Hernandez-Murillo

No 2006-001, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We apply spatial econometric techniques to models of state and local fiscal policy convergence. Total tax revenue and expenditures, as well as broad tax and expenditure categories, of state and local governments in each of the 48 contiguous U.S. states are examined. We extend work by Scully (1991) and Annala (2003) in much the same way that Rey and Montouri (1999) extended the literature dealing with income convergence among U.S. states. Our results indicate that most fiscal policies have been converging and exhibit spatial dependence. A more specific interpretation of our general spatial results is that the finding of spatial dependence indicates 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 that output. Our models further demonstrate that state expenditure growth is dependent upon 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: Fiscal; policy (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-geo, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Public Finance Review, May 2007, 35(3), pp. 361-84

Downloads: (external link)
https://s3.amazonaws.com/real.stlouisfed.org/wp/2006/2006-001.pdf Full text (application/pdf)

Related works:
Journal Article: Spatial Dependence in Models of State Fiscal Policy Convergence (2007)
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:fip:fedlwp:2006-001

Ordering information: This working paper can be ordered from

DOI: 10.20955/wp.2006.001

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Scott St. Louis ().