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The Private Sector Impact Of State And Local Government: Has More Become Bad?

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  • LORI L. TAYLOR
  • STEPHEN P. A. BROWN

Abstract

Early research suggests some increases in state and local government spending more than offset the negative effects of the tax increases needed to fund them. More recent research finds the growth of state and local government generally discourages private sector growth. Using panel data on private employment, capital and output for the 48 contiguous states, the authors find that government size influences whether additional government helps or hinders private sector growth. The rapid growth of state and local government in the late 1980s likely outstripped the willingness to pay. With government growth moderating in the 1990s, however, the private sector response has become more favorable. (JEL H3, H4, R5)

Suggested Citation

  • Lori L. Taylor & Stephen P. A. Brown, 2006. "The Private Sector Impact Of State And Local Government: Has More Become Bad?," Contemporary Economic Policy, Western Economic Association International, vol. 24(4), pages 548-562, October.
    • Handle: RePEc:bla:coecpo:v:24:y:2006:i:4:p:548-562
    DOI: 10.1093/cep/byl002
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    References listed on IDEAS

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    Cited by:

    1. Dan Rickman & Hongbo Wang, 2020. "U.S. State And Local Fiscal Policy And Economic Activity: Do We Know More Now?," Journal of Economic Surveys, Wiley Blackwell, vol. 34(2), pages 424-465, April.
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    3. Kamar Ali & Mark Partridge & Dan Rickman, 2012. "International immigration and domestic out-migrants: are domestic migrants moving to new jobs or away from immigrants?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 49(2), pages 397-415, October.
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    5. Samira Bakhshi & Mohammad Shakeri & M. Rose Olfert & Mark D. Partridge & Simon Weseen, 2009. "Do Local Residents Value Federal Transfers?," Public Finance Review, , vol. 37(3), pages 235-268, May.
    6. John Deskins & Brian Hill, 2010. "Have State Tax Interdependencies Changed Over Time?," Public Finance Review, , vol. 38(2), pages 244-270, March.
    7. John Deskins & Brian Hill & Laura Ullrich, 2010. "Education Spending and State Economic Growth: Are All Dollars Created Equal?," Economic Development Quarterly, , vol. 24(1), pages 45-59, February.
    8. Yihua Yu & Dan S. Rickman, 2013. "US state and local fiscal policies and non-metropolitan area economic performance: A spatial equilibrium analysis," Papers in Regional Science, Wiley Blackwell, vol. 92(3), pages 579-597, August.
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    10. Sohani Fatehin & David L. Sjoquist, 2021. "State and Local Taxes and Employment by Wage Level," Economic Development Quarterly, , vol. 35(1), pages 53-65, February.

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    More about this item

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H4 - Public Economics - - Publicly Provided Goods
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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