TY  - JOUR
AU  - Feenberg,Daniel R.
AU  - Gentry,William
AU  - Gilroy,David
AU  - Rosen,Harvey S.
TI  - Testing the Rationality of State Revenue Forecasts
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2628
PY  - 1989
Y2  - November 1989
UR  - http://www.nber.org/papers/w2628
L1  - http://www.nber.org/papers/w2628.pdf
N1  - Author contact info:
Daniel R. Feenberg
National Bureau of Economic Research
1050 Massachusetts Avenue
Cambridge, MA 02138
Tel: 617/588-0343
Fax: 617/868-2742
E-Mail: feenberg@nber.org

William M. Gentry
Department of Economics
Williams College
Morey House
Williamstown, MA  01267
Tel: 413-597-4257
Fax:  413-597-4045
E-Mail: William.M.Gentry@williams.edu

Harvey S. Rosen
Department of Economics
Fisher Hall
Princeton University
Princeton, NJ 08544-1021
Tel: 609/258-4022
Fax: 609/258-6419
E-Mail: HSR@princeton.edu
AB  - In recent months, the governors of several states have suffered major political embarrassments because actual revenues fell, substantially short of the predictions in their respective budgets. Such episodes focus attention on the question of whether states do a "good" job of forecasting revenues. In modern economics, forecasts are evaluated on the basis of whether or not they are "rational" -- do the forecasts optimally incorporate all information that is available at the tune they are made? This paper develops a method for testing the rationality of state revenue forecasts, and applies it to the analysis of data from New Jersey, Massachusetts, arid Maryland. One of our main findings is that in all three states, the forecasts of own revenues are systematically biased downward.
ER  -