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The tax-spending nexus : evidence from a panel of US state–local governments

Westerlund, Joakim, Mahdavi, Saeid and Firoozi, Fathali 2011, The tax-spending nexus : evidence from a panel of US state–local governments, Economic modelling, vol. 28, no. 3, pp. 885-890.

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Title The tax-spending nexus : evidence from a panel of US state–local governments
Author(s) Westerlund, Joakim
Mahdavi, Saeid
Firoozi, Fathali
Journal name Economic modelling
Volume number 28
Issue number 3
Start page 885
End page 890
Total pages 6
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2011-05
ISSN 0264-9993
Keyword(s) panel cointegration
panel unit root
public finance
state and local government
tax-spend
Summary We re-examine the tax-spending nexus using a panel of 50 US state–local government units between 1963 and 1997. We find that, unlike tax revenues, expenditures adjust to revert back to a long-term equilibrium relationship. The evidence on the short-term dynamics is also consistent with the tax-and-spend hypothesis. One implication of this finding is that the size of the government at the state–local level is not determined by expenditure demand, but rather by resource supply. This is consistent with the fact that many US state and local governments operate under constitutional or legislative limitations that seek to constrain deficits.
Language eng
Field of Research 159999 Commerce, Management, Tourism and Services not elsewhere classified
Socio Economic Objective 970115 Expanding Knowledge in Commerce, Management, Tourism and Services
HERDC Research category C1.1 Refereed article in a scholarly journal
Copyright notice ©2010, Elsevier B.V.
Persistent URL http://hdl.handle.net/10536/DRO/DU:30046286

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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