This paper analyzes state government response to changes in the underlying economy with a view to determining whether, and to what extent, state governments respond to economic fluctuations. Specifically, we build impulse response functions from a panel of US states to examine how states cope...

We examine whether state government responses to rising Medicaid costs cause reduced low income assistance, overall state budget cuts, or higher taxes. We segment Medicaid recipient groups into families, the disabled, and the elderly. Using GMM estimation, we instrument for endogenous program...