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The Intertemporal Relationship between State and Local Government Revenues and Expenditures: Evidence from OECD Countries

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  • Joulfaian, David
  • Mookerjee, Rajen

Abstract

This paper addresses the intertemporal relationship between state and local government revenues and expenditures in sixteen OECD countries. The results support both the spend-and-tax hypothesis and the tax-and-spend hypothesis. The results also highlight the importance of controlling for the effects of grants in bivariate causality tests between revenues and expenditures at the sub- national level. The paper also provides a comparison of the intertemporal relationship between government revenues and expenditures at the central and subnational levels.

Suggested Citation

  • Joulfaian, David & Mookerjee, Rajen, 1990. "The Intertemporal Relationship between State and Local Government Revenues and Expenditures: Evidence from OECD Countries," Public Finance = Finances publiques, , vol. 45(1), pages 109-117.
    • Handle: RePEc:pfi:pubfin:v:45:y:1990:i:1:p:109-17
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    Citations

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    Cited by:

    1. Stöhlker, Daniel & Neumeier, Florian & Fuest, Clemens, 2018. "Tax Cuts Starve the Beast! Evidence from Germany," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181592, Verein für Socialpolitik / German Economic Association.
    2. Ali F. Darrat, 2002. "Budget Balance Through Spending Cuts Or Tax Adjustments?," Contemporary Economic Policy, Western Economic Association International, vol. 20(3), pages 221-233, July.
    3. M. Haider Hussain, 2004. "On the Causal Relationship between Government Expenditure and Tax Revenue in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 9(2), pages 105-117, Jul-Dec.
    4. Gabriella Legrenzi & Costas Milas, 2002. "A Multivariate Approach to the Growth of Governments," Public Finance Review, , vol. 30(1), pages 56-76, January.
    5. Ali F. Darrat, 1998. "Tax and Spend, or Spend and Tax? An Inquiry into the Turkish Budgetary Process," Southern Economic Journal, John Wiley & Sons, vol. 64(4), pages 940-956, April.
    6. Mehmet Serkan Tosun & Sohrab Abizadeh, 2005. "Economic growth and tax components: an analysis of tax changes in OECD," Applied Economics, Taylor & Francis Journals, vol. 37(19), pages 2251-2263.
    7. Westerlund, Joakim & Mahdavi, Saeid & Firoozi, Fathali, 2011. "The tax-spending nexus: Evidence from a panel of US state-local governments," Economic Modelling, Elsevier, vol. 28(3), pages 885-890, May.
    8. Paleologou, Suzanna-Maria, 2013. "Asymmetries in the revenue–expenditure nexus: A tale of three countries," Economic Modelling, Elsevier, vol. 30(C), pages 52-60.
    9. Teresa Famulska & Jan Kaczmarzyk & Malgorzata Grzaba, 2020. "The Relationship Between Tax Revenue and Public Social Expenditure in the EU Member States," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 1136-1156.
    10. Mr. Jean-Claude Nachega & Mr. Ousmane Dore, 2000. "Budgetary Convergence in the WEAMU: Adjustment Through Revenue or Expenditure?," IMF Working Papers 2000/109, International Monetary Fund.
    11. James E. Payne, 2003. "A Survey of the International Empirical Evidence on the Tax-Spend Debate," Public Finance Review, , vol. 31(3), pages 302-324, May.
    12. M. Haider Hussain, 2005. "On the Causal Relationship between Government Expenditure and Tax Revenue in Pakistan," Macroeconomics 0509014, University Library of Munich, Germany.
    13. Krasnopeeva, Natalia, 2023. "Revenues and expenditures of Russian regional budgets: Granger causality analysis," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 70, pages 5-33.
    14. Michele Salvi & Christoph A. Schaltegger, 2023. "Tax more or spend less? Historical evidence from Switzerland’s federal budget plans," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(3), pages 678-705, June.
    15. Aliyu Alhaji Jibrilla, 2016. "Fiscal sustainability in the presence of structural breaks: Does overconfidence on resource exports hurt government’s ability to finance debt? Evidence from Nigeria," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1170317-117, December.
    16. Mohsen Mehrara & Abbas Ali Rezaei, 2014. "The Long Run Relationship between Government Revenue and Expenditure in Iran: A Co integration Analysis in the Presence of Structural Breaks," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(5), pages 288-301, May.

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