Work

Fiscal Policy Multipliers on Subnational Government Spending

Year: 2012

Type: article

Abstract: Balanced budget requirements lead to substantial pro-cyclicality in state government spending, with the stringency of a state's rules driving the pace at which it must adjust to shocks. We show that fiscal institutions can generate natural experiments in deficit-financed spending that are informative regarding fiscal stabilization policy. Alternative sources of variation in subnational fiscal policy often implicitly involve “windfall” financing, which precludes any effect of future debt or taxation on current consumption and investment. Consistent with a role for these “Ricardian” effects, our estimates are smaller than those in related studies, implying an on-impact multiplier below 1. (JEL C51, E32, E62, H72)

Source: American Economic Journal Economic Policy

DOI: 10.1257/pol.4.2.46

Authors: Jeffrey Clemens, Stephen Miran

Institutions: Stanford Institute for Economic Policy Research, Stanford University

Language: English

Topic: Fiscal Policies and Political Economy

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2009586334

FWCI: 48.99

Cites: 37

Cited by: 220

Related to: 10