U.S. State and Local Government Finances Over the Current Cycle

Author/Editor:

Tamim Bayoumi

Publication Date:

December 1, 1992

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The recent slowdown in the U.S. economy has led to state and local government tax increases and expenditure cuts that have lowered aggregate demand, in contrast to earlier downturns when the sector provided significant automatic stabilizers. Several explanations for this change are examined, including the role of federal grants, mandates, tax revolts, and compensation. The first three factors are found to be relatively unimportant. There does, however, appear to have been a large change in relative compensation over the 1980s, which can account for much of the deterioration in finances.

Series:

Working Paper No. 1992/112

Subject:

Economic sectors Expenditure Fiscal policy Fiscal stance Public sector Revenue administration Total expenditures

English

Publication Date:

December 1, 1992

ISBN/ISSN:

9781451853520/1018-5941

Stock No:

WPIEA1121992

Pages:

35

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