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Working Paper
Disinvesting in the future?: a comprehensive examination of the effects of state appropriations for public higher education
In aggregate, state appropriations are the largest revenue source for public higher education in the United States. However, these appropriations have significantly declined over past decades, drawing serious concerns about the potential negative impact on schools and students. This paper provides a more comprehensive study of the effects of state appropriations than previous research, while explicitly exploring and testing the heterogeneity of the effects by institutional type. It finds strong evidence of the negative effects of state appropriation cuts in the areas of tuition and fees, ...
Working Paper
Smoothing state tax revenues over the business cycle: gauging fiscal needs and opportunities
During the two most recent U.S. recessions in 2001 and in 2007?2009, state governments experienced an unusually high degree of fiscal stress due to increased revenue cyclicality. Expanding upon the aggregate evidence, this paper explores the degree to which individual states have experienced fluctuating tax receipts over the business cycle. The findings provide state policymakers with information to better understand the extent and causes of this tax revenue cyclicality and, in the context of balanced budget requirements, the efficacy of alternative measures that might be employed to smooth ...
Working Paper
Walking a tightrope: are U. S. state and local governments on a fiscally sustainable path?
This paper develops a new measure of state and local fiscal sustainability called the "trend gap," which is based on socioeconomic and other fundamental factors and removes the short-term influence of the business cycle. The paper estimates the trend gap and finds that the nationwide per capita trend gap has been on a growing path over the past three decades, a different conclusion than found in previous studies. Social insurance and income maintenance programs have played a major role in the growth of the trend gap, while pension and other post-employment benefits (OPEB) plans have become ...
Working Paper
What determines the level of local business property taxes?
Conventional economic theory intuitively holds that local business property taxes, which account for over one-third of the state and local taxes that firms pay, should be efficiently structured in order to recover the exact cost of providing public services to these firms. However, this conceptual thinking does not accord with observed geographic and over-time variation in business taxation. To better explain these discrepancies, the author develops an alternative theoretical model with heterogeneous firms, some of which are more profitable than others in certain locations. This model more ...
Working Paper
Dynamic Sales Tax Competition: Evidence from Panel Data at the Border
We examine both vertical and horizontal tax competition over time by studying the strategic response of county sales taxation to state sales taxes and to cross-border neighboring municipalities’ combined (state and county) taxes. Using county and state sales tax data from 2003 through 2009, we employ both static and dynamic panel analysis as well as an instrumental variables approach in combination with a border analysis. Our results confirm the presence of tax competition in the cross section, as previous studies have found. Results from the fixed-effects and dynamic panel analysis also ...
Working Paper
Black Mayors and Black Communities
Do Black communities economically benefit from the election of a Black mayor? I find majority-Black ZIP codes experience gains in all areas of economic activity relative to non-Black communities following the first election of a Black mayor. Across industries, the number of establishments in majority-Black ZIP codes increases, including those that rely on foot traffic. Before breakthrough elections, Black residents are less likely than white residents to identify as self-employed across all cities, but this difference is reduced after an election; however, the cities in which the ...
Working Paper
Does Zoning Help or Hinder Transit-Oriented (Re)Development?
Despite its reputation as a car-oriented city, the Los Angeles metropolitan area has made substantial investments in developing rail transit since 1990. In cities with older "legacy" rail systems, the built environment has developed over time around fixed transit infrastructure, creating land use patterns oriented towards long-standing rail stations. By contrast, rail stations in Los Angeles were added to an already dense built environment, with auto oriented zoning and established land use patterns. In this paper we ask whether redevelopment is occurring around Los Angeles? rail stations, ...
Working Paper
External and Public Debt Crises
The recent debt crises in Europe and the U.S. states feature similar sharp increases in spreads on government debt but also show important differences. In Europe, the crisis occurred at high government indebtedness levels and had spillovers to the private sector. In the United States, state government indebtedness was low, and the crisis had no spillovers to the private sector. We show theoretically and empirically that these different debt experiences result from the interplay between differences in the ability of governments to interfere in private external debt contracts and differences in ...
Working Paper
It's Good Weather for More Government: The Effect of Weather on Fiscal Policy
I show that weather conditions on election day affect future fiscal policy. When it rains during state elections, there is an increase in the relative income of voters, which is followed by an increase in expenditure and debt. The increase in expenditure is directed towards a larger police and safety budget. This result is compatible with a model of complementarity between consumption and public goods. In the model, high-income voters support an increase in safety budget because they benefit more from it than low-income voters.
Journal Article
COVID-19 Challenges State and Local Government Finances
As the coronavirus pandemic wreaks havoc on the U.S. economy, state and local governments will not be immune from the pain. In the near term, governments face liquidity challenges, as many tax deadlines have been postponed. In the longer term, governments will experience large revenue declines that may lead to significant budget cuts.