Do State Fiscal Policies Affect State Economic Growth?

James Alm () and Janet Rogers ()
Additional contact information
Janet Rogers: Department of Planning Section, Nevada Department of Administration Division of Budget & Planning

No 1107, Working Papers from Tulane University, Department of Economics

Abstract: What factors influence state economic growth? This paper uses annual state (and local) data for the years 1947 to 1997 for the 48 contiguous states to estimate the effects of a large number of factors, including taxation and expenditure policies, on state economic growth. A special feature of the empirical work is the use of orthogonal distance regression (ODR) to deal with the likely presence of measurement error in many of the variables. The results indicate that the correlation between state (and state and local) taxation policies is often statistically significant but also quite sensitive to the specific regressor set and time period; in contrast, the effects of expenditure policies are much more consistent. Of some interest, there is moderately strong evidence that a state's political orientation has consistent and measurable effects on economic growth; perhaps surprisingly, a more "conservative" political orientation is associated with lower rates of economic growth. Finally, correction for measurement error is essential in estimating the growth impacts of policies. Indeed, when measurement error is considered via ODR estimation, the estimation results do not support conditional convergence in state per capita income.

Keywords: fiscal policies; regional economic growth; orthogonal distance regression (search for similar items in EconPapers)
JEL-codes: H2 H7 O1 O4 R1 R5 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2011-04
New Economics Papers: this item is included in nep-fdg, nep-geo, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
http://repec.tulane.edu/RePEc/pdf/tul1107.pdf First version, 2011 (application/pdf)

Related works:
Journal Article: Do State Fiscal Policies Affect State Economic Growth? (2011)
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:tul:wpaper:1107

Access Statistics for this paper

More papers in Working Papers from Tulane University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Kerui Geng ().