State and Local Government Finances: Was There a Structural Break in the Reagan Years?

The Reagan administration's “New Federalism” and tax reform proposals were expected to have chilling effects on growth of state and local government revenues and expenditures. This paper examines the hypothesis that there was a structural break in state and local government fiscal behavior in the 1980s. Although the evidence is far from conclusive, it does suggest some different fiscal patterns in this decade. However, the real structural break appears to have occurred in the late 1970s and these trends have continued during the Reagan years.     

“Bad Neighborhood” and Internet Adoption in Poor Countries: What is behind the Persistent Digital Gap?

The paper investigates the determinants of Internet adoption in poor countries, focusing on the role of macro‐geographic location (neighborhood). It is argued that neighboring countries are interconnected by various kinds of spillovers, including knowledge spillovers as well as spillovers of norms and attitudes that affect individual adoption behavior. The empirical findings support the view that Internet adoption is affected by adoption rates in neighboring countries, even when controlling for a wide range of covariates. Addressing potential endogeneity concerns using an instrumental variable approach moreover suggests these relationships to be causal. The findings imply that international policies to support Internet adoption in poor countries might be more effective if they target groups of neighboring countries rather than single countries in order to better exploit spillovers between neighboring countries.     

State Fiscal Responses to Federal Government Grants

This paper examines the effect of federal government grants on state fiscal decisions. The study presents a disaggregated analysis of state government that allows for the precise measurement of important fiscal effects. State government is modeled as maximizing a social welfare function defined over government expenditures and taxes. The positive theory of grant response is tested and confirmed. The results indicate that matching grants stimulate government expenditures more than nonmatching grants. The results also suggest that federal grant cutbacks will lead to reductions in state expenditures for all key programs but that the composition of this change will depend on the nature of the federal cutbacks.     

The impacts of fiscal decentralization on environmental innovation in China

Environmental innovation is the fundamental support for sustainable development. Exploiting Chinese provincial panel data from 2007 to 2017, this study investigates the impacts of fiscal decentralization on environmental innovation. In particular, we discuss the regulating role of government’s environmental protection expenditures relying on the mediator effect model. The empirical analyses show that fiscal decentralization cannot only directly promote environmental innovation, but also indirectly weaken environmental innovation through the environmental protection expenditure of the local government. The overall performance is that fiscal decentralization promotes environmental innovation. It is noteworthy that there is regional heterogeneity in the impact of fiscal decentralization on environmental innovation. The impact in the east is significantly higher than in the central and western regions in China.     

A Synthesis of Empirical Research on the Impact of Government onLong‐Run Growth

This paper provides a synthesis of the 1983–98 published literature on the empirical evidence regarding the interaction between government policies and growth. Five policy areas are considered: general government consumption, tax rates, education expenditures, defense and public infrastructure. The most conclusive results in the literature relate to the positive impact of education expenditures on growth. Public infrastructure also appears important. Regression analysis remains the most commonly adopted research methodology. A better link with current theories will be obtained when parameter calibration methods formicro‐foundations based models replace parameter estimation of regression models with ad hoc specifications. Nonetheless, there remain severe limitations on what can be learned for policy from highly aggregative models of endogenous growth. Better data are needed at the regional macro and meso levels to complement thecurrently available pooled cross‐section time‐series country data. The potential endogeneity of government fiscal variables can be resolved through the selection of appropriate instrumental variables, such as those that arise in cases of “natural experiments”.     

财政农业投入对江西农民收入影响的实证研究

为寻求三农问题解决的政策支持,利用单位根平稳性和协整检验的理论,研究财政农业投入与江西农民收入的关系。实证分析表明,财政用于农业的支出是江西农民人均纯收入的格兰杰原因,所以应当使财政用于农业的支出稳定增长,这有利于农民增收。而对财政用于农业的支出各分项目的研究则表明,支援农村生产支出和其他费用能促进农民增收,所以应当加强对财政用于农业的支出资金的使用和管理,争取使有限的资金能发挥出最大的效益。?     

Tax enforcement interactions among Chinese provinces: A frontier and spatial analysis

Spatial interactions in tax policy have been examined intensively for developed countries. This study presents new evidence of tax enforcement interactions from a developing country. A trend of intensified enforcement on the corporate income tax (CIT) over time is identified among Chinese provinces. Additionally, stringent CIT enforcement in neighboring provinces enhances CIT enforcement in the surrounded province. Furthermore, tax enforcement interactions involve both the state and local tax authorities. The findings not only help to understand the Chinese “regionally decentralized authoritarian system,” but also echo second‐generation fiscal federalism that highlights the role of institutional incentives in shaping intergovernmental fiscal relations.     

The Impact of Tourism on Local Government Expenditures

The aim of this study is to broaden the understanding of the impact of tourism on local government expenditures. Specifically, a regression model is developed to examine the hypothesis that there is a direct relationship between the degree of reliance of the local economy on tourism and local government expenditures. This study indicates that the degree of reliance of a local economy on tourism does have a statistically significant impact on the level of capital outlays, transportation, police protection, fire protection, corrections, parks and recreation, financial administration, and general government administration expenditures. This analysis indicates that the share of tourism in the local economy can influence expenditures on a variety of local government services, thus tourism should not be regarded as a totally costless instrument of economic development.     

FDI in Space Revisited: The Role of Spillovers on Foreign Direct Investment within the European Union

We estimate a spatial econometric interaction model for bilateral aggregate FDI stock data between 25 European Union member countries in 2010. We find evidence for spatial spillovers of foreign direct investment for three different types of spatial dependence. Our results document FDI spillovers between neighboring countries of FDI origin countries, neighboring countries of FDI destination countries as well as between neighboring countries of both FDI origin and destination countries. Relying on recently developed methods, we provide the first model‐consistent interpretation of marginal effects of market size (measured by GDP) as well as GDP per capita on bilateral FDI activity. Our research highlights the importance of taking into account spatial lags when estimating bilateral FDI gravity models.     

Is There a Trade and Defense Perimeter? The Regional Impacts of Trade and Defense Spending in the United States, 1978-1986

Using an expanded shift share technique to impute international trade-related industrial job change, the extent to which structural changes in trade and defense spending appear to explain state economic performance differentials is explored. The findings show there is limited support for the “trade perimeter” argument, but strong support for the hypothesized relationship between military procurement spending and state trade performance. To the extent that defense commitments, especially to private sector procurement and R & D, have operated as an informal industrial policy, particularly by guaranteeing strong domestic sales, they have enabled a significant number of states peripheral to the traditional industrial heartland to build a strong international trade posture. The conclusion offers observations on the economic development implications of these findings.     

Growth Effects of Governmental Policies: A Comparative Analysis in a Multi‐Country Context

The potential interactions among governmental policies, investments andeconomic growth are complex and manifold. This paper will perform a systematic comparative analysis of the various economic insights that are currently available on these complex relationships, both theoretically (by a selective literature review) and empirically (by reviewing the empirically obtained insights). Despite the wide variety of potential theoretical relationshipsbetween government expenditures, taxation and growth, most empirical analyses are restricted to simple linear regressions of growth on some measure of government expenditures. We will indicate directions for future empirical research that may enrich our knowledge about the complex relationship between fiscal policies and economic growth, not only nationally but also regionally.     

The Spatial Impact of Reaganomics: A Test of Six Models

Recent analyses of the Reagan budget reallocations suggest that the spatial distribution of public expenditures among the American states have undergone a major change. What remains unclear, however, is why the Reagan budget reallocations generated these clearly defined spatial effects. In trying to answer this question, we identify five explanations of the spatial impacts, explanations focusing on electoral, partisan, wealth, urban-rural, and expenditure base effects. Along with controls for regional effects, these explanations are tested by OLS regression analysis of data on the state allocations of federal expenditures from the last Carter to the first Reagan budgets.     

The Spatial Distribution of Military Spending in the United States 1941-1985

The spatial distribution of military expenditures in the United States is a major influence on the regional shifts of economic activity that are occurring in the US. The purpose of this study is to trace the changing spatial distribution of military prime contract awards (MPCAs) from 1941 to 1985. Using T-mode and S-mode factor analysis, the results indicate that since 1941 there have been four distinct eras in the spatial distribution of MPCAs. During each era the spatial pattern of military spending remained stable. The shift from one era to another appears to be linked to changes in the type of weapons purchased by the Department of Defense. The most recent era, the High-Technology Weapons era, has lasted for twenty years. The long-term stability evident in the spatial distribution of MPCAs supports the argument that military expenditures have played an important role in regional economic development and change. The findings also indicate that, while many states tend to follow the national trend in military spending, there are also four distinct groups of states which have gained and then lost their positions as military production centers. The main reason behind the rapid growth and decline of MPCAs going to these states was their dependence on a single weapons system.     

Fiscal Decentralization and Economic Growth in Central and Eastern Europe

The majority of the literature on fiscal decentralization has tended to stress that the greater capacity of decentralized governments to tailor policies to local preferences and to be innovative in the provision of policies and public services, the greater the potential for economic efficiency and growth. There is, however, little empirical evidence to substantiate this claim. In this paper we examine, using a panel data approach with dynamic effects, the relationship between the level of fiscal decentralization and economic growth rates across 16 Central and Eastern European countries over the 1990–2004 period. Our findings suggest that, contrary to the majority view, there is a significant negative relationship between two out of three fiscal decentralization indicators included in the analysis and economic growth. However, the use of different time lags allows us to nuance this negative view and show that long‐term effects vary depending on the type of decentralization undertaken in each of the countries considered. While expenditure at and transfers to sub‐national tiers of government are negatively correlated with economic growth, taxes assigned at the sub‐national level evolve from having a significantly negative to a significantly positive correlation with the national growth rate. This supports the view that sub‐national governments with their own revenue source respond better to local demands and promote greater economic efficiency     

Location choices of undocumented migrants: Does access to higher public education matter?

We examine the impact of differences in state‐level higher education policies on location choices of undocumented immigrants in the U.S. using six years of available data over the period 2000 to 2012. The effect of greater access to higher education on the percentage of undocumented migrants residing in a state is positive, suggesting the existence of a “higher public education magnet” effect. Among states with favorable higher education policies, undocumented migrants prefer those states with larger networks, despite the likelihood of greater competition for admission to public institutions of higher education. However, undocumented migrants are reluctant to locate in states that have both large networks and unfavorable educational policies. This is possibly because the fear of attracting additional restrictive regulations dominates the positive cost‐saving effect of large networks.     

Income Divergence between Mexican States in the 1990s: The Role of Skill Premium

ABSTRACT During the period 1940–1985 the variance of average incomes across Mexican states fell by 60 percent. Beginning in 1985, however, and coinciding with the adoption of trade liberalization policies and other market‐oriented reforms, state incomes began to diverge. Using microdata from the 1990 and 2000 Mexican Population Censuses, this study decomposes the recent divergence into components due to economy‐wide changes in skill prices and components due to state‐specific changes in the composition of workers. The study finds that the rise in the education premium hindered the progress of poor states and raised the variance of average state wages and labor earnings. However, educational attainment mostly compensated for this income‐widening effect. State‐level regressions reveal that the initial level of education, size of the agricultural sector, and distance from the U.S. border were important factors, while public infrastructure was not. While the border states clearly benefited from increased trade and opening of the economy, I find no evidence that skill demand or the immigration of highly educated workers particularly favored these states.     

Immigration and Ethnic Entrepreneurship: A Comparative Study in the United States

Using Singer's typology of different types of immigration gateways, this study mainly addresses how metropolitan area conditions impact ethnic labor force entrepreneurial choices across ethnicity and gender, within the contexts of different types of immigration gateways. Employing the 5 percent 2000 Integrated Public Usable Microdata Samples and a multilevel regression strategy, this study demonstrates that different types of immigration gateways have distinctive impacts on ethnic entrepreneurship. After controlling for both personal‐ and metropolitan‐level characteristics, it is found that whites and blacks are more likely to own businesses in newer immigration gateways, while Hispanics and Asians are more likely to do so in the more established gateways. In addition, differences as to the interaction effects of gender and regional labor markets are the most significant for blacks and Asians. Such interaction effects reshape gender differences in business ownership across ethnic groups.     

Estimating the economic effects of US state and local fiscal policy: A synthetic control method matching-regression approach

In this paper, we advance the empirical literature on US state and local fiscal policymaking by using the synthetic control method (SCM) to create pairwise matches for states in subsequent regression analysis of the relationships between state and local fiscal policies and several state economic outcomes. Additional contributions include the use of principal component analysis to construct broader narratives of state economic performance and to reduce the dimensionality of the characteristics used in SCM matching, while the regressions also include variables to control for post-matching economic shocks. Compared to conventional regression analysis, the SCM matching-regression approach better addresses potential endogeneity, reduces interpolation bias, and creates fiscal policy measures that better reflect policy differences. The SCM-matched regressions produce more statistically significant relationships between state and local fiscal variables and economic outcomes than do the conventional unmatched regressions, suggesting improved identification of state and local fiscal policy effects on economic outcomes. Robust relationships found include negative economic effects of the own-source revenue burden and property taxes. Consistent with the existing literature, the estimated fiscal policy effects are quantitatively small and unlikely to drive differences in state economic performance.     

Patterns of Broadband Efficiency in the U.S

Data envelopment analysis is used to assess the efficiency of broadband Internet adoption and use in the U.S. Analyses at the state level from 2005 to 2007 suggest that broadband adoption and use is not equally efficient across the U.S. states. Although the instantaneous efficiencies are relatively high for many states, the changes in total factor productivity suggest that the efficiency of broadband adoption and use still increases over time. Moreover, it is observed that efficiency values are often spatially autocorrelated, which suggests spatial dependency from spillovers or interstate competition. This leads to a particular spatial diffusion pattern in broadband adoption. Although states have different strategies in support of broadband expansion they need to identify their shortcomings and use the appropriate mix of inputs (and outputs) to improve their efficiencies.     

Regional Economic Activity and Petroleum Industry Incentive Policies: Utah's Uintah Basin

ABSTRACT Proponents of petroleum industry subsidies often assert that such policies will have positive economic implications for rural communities. This paper examines the economic impacts of such a policy in Utah. Specifically, this paper quantifies the direct and indirect economic and fiscal impacts of a tax credit granted for oil and gas well workovers in Utah's Uintah Basin. The analysis is made possible by an input-output model constructed specifically for Utah's oil producing economy. The tax credit policy was found to generate a net fiscal loss for the state. However, it does generate employment in the Uintah Basin. The total per job cost to the state of generating an average of one job per year for 5 years through the tax credit policy is $24,056 (1991 dollars). However, if the public expenditure impacts are taken into account, then the cost per job could be as high as $48,423 (1991 dollars). Whether there are other ways to generate the same employment gains at a lower cost was lost in the political debate surrounding this petroleum industry tax credit.