National Fiscal Policies to Fight Recessions in US States
- (pp. 131-36)
Abstract
Countercyclical fiscal policy generally focuses on national economic downturns. But US states experience significantly different patterns of unemployment, and demand shocks appear to drive much of that variation. State budget rules limit the ability of states to mount their own countercyclical policies. Federal taxes and spending programs have countercyclical effects within states, but the magnitude of those effects depends on policies that were designed based on other considerations (just as the extent of national automatic stabilizers is the result of policies based on other considerations). Enacting countercyclical fiscal policy calibrated to state unemployment rates would reduce the cost of recessions.Citation
Dynan, Karen, and Douglas Elmendorf. 2020. "National Fiscal Policies to Fight Recessions in US States." AEA Papers and Proceedings, 110: 131-36. DOI: 10.1257/pandp.20201076Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- E62 Fiscal Policy
- H71 State and Local Taxation, Subsidies, and Revenue
- H72 State and Local Budget and Expenditures
- R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics