Two Tales of Two U.S. States: Regional Fiscal Austerity and Economic Performance

Dan Rickman and Hongbo Wang

No 1710, Economics Working Paper Series from Oklahoma State University, Department of Economics and Legal Studies in Business

Abstract: The recent fiscal austerity experiments undertaken in the states of Kansas and Wisconsin have generated considerable policy interest. Using a variety of identification approaches within a difference-in-differences framework and examining a wide range of economic indicators, this paper assesses whether the experiments have spurred growth in the states as promised by the governors and legislatures which enacted them into law. The overall conclusion from the paper is that the fiscal experiments did not spur growth, and if anything, harmed state economic performance. Among the identification approaches used, the Synthetic Control Method (Abadie and Gardeazabal 2003; Abadie et al., 2010) is demonstrated to provide the most compelling evidence.

Keywords: Fiscal austerity; State taxes; Synthetic Control Method (search for similar items in EconPapers)
JEL-codes: H71 R12 R23 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2017-03
New Economics Papers: this item is included in nep-geo and nep-ure
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Related works:
Journal Article: Two tales of two U.S. states: Regional fiscal austerity and economic performance (2018)
Working Paper: Two Tales of Two U.S. States: Regional Fiscal Austerity and Economic Performance (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:okl:wpaper:1710

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