Intertemporal Analysis of State and Local Government Spending: Theory ad Tests
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Douglas Holtz-Eakin, Harvey S. Rosen, Schuyler Tilly
NBER Working Paper No. 4261 (Also Reprint No. r1884)*
Issued in May 1994
NBER Program(s): PE
Do state and local governments smooth their consumption spending across years, or is their spending driven mainly by contemporaneous changes in resources? We design a test to determine which view of state and local spending is more consistent with the data. We find that state and local spending is determined primarily by current (as opposed to permanent) resources. That is, despite their apparent ability to skirt balanced budget laws, states and localities do not typically smooth their expenditures over time.
*Published:
Journal of Urban Economics, vol. 35, p. 159-174, 1994
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