Interstate Differences in State and Local Revenues

The focus of this study is the examination of the interstate differences in per capita state and local revenues. On one side free competition among states is supposed to keep the interstate differences in per capita state and local revenues at a minimum level. On the other side, the interstate differences in variables like income and taste of consumers, natural conditions (like climate), state's size (scale effect), and others may explain the existing interstate differences in per capita state and local revenues. The empirical results indicate that we successfully explained over 90 percent of the variance in per capita state and local revenues. Additional empirical results reveal that the federal government distributes money among states in a discriminate fashion based on region and size.