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Ricardian equivalence for sub-national states

Author

Listed:
  • Joe Stone

    (University of Oregon)

  • Jo Anna Gray

    (University of Oregon)

Abstract

The authors test Ricardian equivalence within an endogenous growth model for U.S. states, which have high rates of migration relative to most countries. Results are consistent with both Ricardian equivalence and endogenous growth, despite the relative ease of migration. Increases in productive government expenditures increase long-run real growth by the same amount, for example, whether financed by taxes or bonds. State rules limiting the use of bond financing may play a role in supporting Ricardian equivalence. The study provides the first explicit test of Ricardian equivalence for sub-national states in the context of an endogenous growth model.

Suggested Citation

  • Joe Stone & Jo Anna Gray, 2006. "Ricardian equivalence for sub-national states," Economics Bulletin, AccessEcon, vol. 5(1), pages 1-12.
    • Handle: RePEc:ebl:ecbull:eb-05e00011
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    Cited by:

    1. Stone, Joe & Bania, Neil, 2009. "Brains, drains, and roads, growth hills: complementarity between public education and infrastructure in a half-century panel of states," MPRA Paper 16173, University Library of Munich, Germany.

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    More about this item

    Keywords

    endogenous growth;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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