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Use or abuse of highway tax revenues? An economic analysis of highway spending

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  • R. K. Goel
  • M. A. Nelson

Abstract

This article develops a theoretical model and employs recent state-level data on highway finance to assess the consequences of using highway levies for non-highway purposes. It examines whether states that divert some of their highway-related levies to fund general government services spend systematically less on highway services than jurisdictions that do not; the 'displacement effect' of revenue diversion. The results show that states that use highway related levies to fund general government services do systematically spend less on highways than states that do not.

Suggested Citation

  • R. K. Goel & M. A. Nelson, 2003. "Use or abuse of highway tax revenues? An economic analysis of highway spending," Applied Economics Letters, Taylor & Francis Journals, vol. 10(13), pages 813-819.
    • Handle: RePEc:taf:apeclt:v:10:y:2003:i:13:p:813-819
    DOI: 10.1080/1350485032000129566
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    References listed on IDEAS

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    1. Congleton, Roger D & Bennett, Randall W, 1995. "On the Political Economy of State Highway Expenditures: Some Evidence of the Relative Performance of Alternative Public Choice Models," Public Choice, Springer, vol. 84(1-2), pages 1-24, July.
    2. Hamilton, Bruce W., 1983. "The flypaper effect and other anomalies," Journal of Public Economics, Elsevier, vol. 22(3), pages 347-361, December.
    3. Small, Kenneth A & Winston, Clifford, 1986. "Efficient Pricing and Investment Solutions to Highway Infrastructure Needs," American Economic Review, American Economic Association, vol. 76(2), pages 165-169, May.
    4. Barnett, Richard R & Levaggi, Rosella & Smith, Peter, 1991. "Does the Flypaper Model Stick? A Test of the Relative Performance of the Flypaper and Conventional Models of Local Government Budgetary Behaviour," Public Choice, Springer, vol. 69(1), pages 1-18, February.
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    Cited by:

    1. William B. Hankins & Frank Goetzke & Gary Hoover, 2019. "Partisan Determinants of Federal Highway Grants," The Review of Regional Studies, Southern Regional Science Association, vol. 49(3), pages 389-406.
    2. Joshua Hall & Shree Baba Pokharel, 2017. "Does the Median Voter or Special Interests Determine State Highway Expenditures? Recent Evidence," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 45(1), pages 59-69, March.
    3. Phuong Nguyen-Hoang, 2015. "Volatile earmarked revenues and state highway expenditures in the United States," Transportation, Springer, vol. 42(2), pages 237-256, March.

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