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Jel Classification:H72 

Report
State Investment in Higher Education: Effects on Human Capital Formation, Student Debt, and Long-Term Financial Outcomes of Students

Most public colleges and universities rely heavily on state financial support. As state budgets have tightened in recent decades, appropriations for higher education have declined substantially. Despite concerns expressed by policymakers and scholars that the declines in state support have reduced the return to education investment for public sector students, little evidence exists that can identify the causal effect of these funds on long-run outcomes. We present the first such analysis in the literature using new data that leverages the merger of two rich datasets—consumer credit records ...
Staff Reports , Paper 941

Working Paper
From urban core to wealthy towns: nonschool fiscal disparities across Connecticut municipalities

Fiscal disparities occur when economic resources and public service needs are unevenly distributed across localities. There are two equity concerns associated with fiscal disparities. First, as Yinger (1986) shows, it is not considered fair to require two otherwise-identical households to pay a different amount of taxes for the same level of public services simply because they live in different towns. Second, fiscal disparities render some towns at a disadvantage in economic competition (Downes and Pogue 1992). These towns must impose a higher tax rate and/or provide a lower level of public ...
Working Papers , Paper 15-14

Working Paper
What Explains Neighborhood Sorting by Income and Race?

Why do high-income black households live in neighborhoods with characteristics similar to those of low-income white households? We find that neighborhood sorting by income and race cannot be explained by financial constraints: High-income, high-wealth black households live in similar-quality neighborhoods as low-income, low-wealth white households. We provide evidence that black households sort across neighborhoods according to some non-pecuniary factor(s) correlated with the racial composition of neighborhoods. Black households sorting into black neighborhoods can explain the racial gap in ...
Working Papers , Paper 18-08R

Journal Article
The fiscal position of the state and local government sector: developments in the 1990s

After a difficult period during the early 1990s, the fiscal position of state and local governments has improved considerably in the past three years. States, as a group, have fared relatively well, although some local governments are still struggling with fiscal difficulties. In addition, the sector as a whole continues to face persistent underlying structural problems. This article first examines the primary budget concepts that are generally used to evaluate the fiscal condition of state and local governments. Then it surveys the status of the various levels of government, and finally, it ...
Federal Reserve Bulletin , Volume 82 , Issue Apr

Working Paper
Partisanship and Fiscal Policy in Economic Unions: Evidence from U.S. States

In economic unions the fiscal authority consists not of one, but many governments. We analyze whether partisanship of state-level politicians affects federal policies, such as fiscal stimulus in the U.S. Using data from close elections, we find partisan differences in the marginal propensity to spend federal transfers: Republican governors spend less. This partisan difference has tended to increase with measures of polarization. We quantify the aggregate effects in a New Keynesian model of Republican and Democratic states in a monetary union: Lowering partisan differences to levels ...
Working Papers , Paper 20-20

Working Paper
Saving for a rainy day: estimating the appropriate size of U.S. state budget stabilization funds

Rainy day funds (RDFs) are potentially an important countercyclical tool for states to stabilize their budgets and the overall economy during economic downturns. However, U.S. states have often found themselves exhausting their RDFs and having to raise tax rates or reduce expenditures while still experiencing a downturn. Therefore, how much each state should save in its RDF has become an increasingly important policy question. To address this issue, this paper applies several new methodologies to develop target RDF levels for each U.S. state, based on the estimated short-term revenue ...
Working Papers , Paper 14-12

Report
The effect of state pension cut legislation on bank values

This study provides an empirical analysis of the impact of Wisconsin and Ohio pension cut legislation on values of banks operating in Wisconsin and Ohio, banks operating in other states in which pension cut legislation was being considered as Wisconsin and Ohio went through its legislative process, and all publicly traded U.S. banks. We find that banks doing business in Wisconsin and Ohio experience positive (negative) stock price reactions to announcements that indicate an increased (a decreased) probability of pension cut legislation. The stock price reactions are positively related to the ...
Staff Reports , Paper 679

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.
Economic Bulletin , Issue May 13, 2020 , Pages 4

Working Paper
The Impact of Weather on Local Government Spending

While there is a new and rapidly growing literature on the effects of climatic factors on economic and social outcomes, little research has been conducted to understand the fiscal impact of weather, especially at the sub-state level. Using data from Massachusetts municipalities from 1990 through 2019, this paper estimates government spending as a function of temperature and precipitation while controlling for municipality and year fixed effects and municipality-specific time trends. The results show that weather has statistically significant and economically meaningful effects on local ...
Working Papers , Paper 22-22

Working Paper
Can Wealth Explain Neighborhood Sorting by Race and Income?

Why do high-income blacks live in neighborhoods with characteristics similar to those of low-income whites? One plausible explanation is wealth, since homeownership requires some wealth, and black households hold less wealth than white households at all levels of income. We present evidence against this hypothesis by showing that wealth does not predict sorting into neighborhood quality once race and income are taken into account. An alternative explanation is that the scarcity of high-quality black neighborhoods increases the cost of living in a high-quality neighborhood for black households ...
Working Papers (Old Series) , Paper 1808

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