US State Fiscal Policy and Natural Resources
- (pp. 238-57)
Abstract
An analytical framework predicts that, in response to an exogenous increase in resource-based government revenue, a benevolent government will partially substitute away from taxing income, increase spending and save. Fifty-one years of US-state level data are largely consistent with this theory. A baseline fixed effects model predicts that a $1.00 increase in resource revenue results in a $0.25 decrease in nonresource revenue, a $0.43 increase in spending and a $0.32 increase in savings. Instrumenting for resource revenue reveals that a positive revenue shock is largely saved and the rest is transferred back to residents in the form of lower non resource tax rates. (JEL H71, H72, H76, Q38, R11)Citation
James, Alexander. 2015. "US State Fiscal Policy and Natural Resources." American Economic Journal: Economic Policy, 7 (3): 238-57. DOI: 10.1257/pol.20130211Additional Materials
JEL Classification
- H71 State and Local Taxation, Subsidies, and Revenue
- H72 State and Local Budget and Expenditures
- H76 State and Local Government: Other Expenditure Categories
- Q38 Nonrenewable Resources and Conservation: Government Policy
- R11 Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
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