Title
The dynamics of the revenue–expenditure nexus: Evidence from US state government finances
Document Type
Article
Publication Date
2013
Department/School
Economics
Publication Title
Public Finance Review
Abstract
Using data from the contiguous US states from 1951 to 2008, this study examines the dynamics of the intertemporal budget constraint to better understand persistent budget deficits. The direction of causality between tax revenues and expenditures is of primary interest in answering the four hypotheses set forth in the literature: tax-spend, spend-tax, fiscal synchronization, and institutional separation. Overall, the results convey evidence in favor of the tax-spend hypothesis. The dynamics differ, however, in that states with relatively higher debt levels respond slower to fiscal imbalances and rely more on expanding debt levels. These results present a clear illustration of the fiscal adjustment mechanism and how states adapt under various institutional restraints.
ISSN
1091-1421
Volume
43
Issue
1
Pages
108-134
Link to Published Version
Recommended Citation
Saunoris, James W. (2013). The dynamics of the revenue–expenditure nexus: Evidence from US state government finances. Public Finance Review, 43(1), 108–134. doi:10.1177/1091142113515051