This paper develops a new measure of state and local fiscal sustainability called the "trend gap," which is based on socioeconomic and other fundamental factors and removes the short-term influence of the business cycle. The paper estimates the trend gap and finds that the nationwide per capita...

Examining the cases of Canada, Germany, and Spain, the role played by fiscal equalization schemes in determining subnational borrowing was analyzed, and the link between regional governments’ primary fiscal balances and gross domestic product per capita was tested econometrically. The study...

This paper analyzes how subnational governments allocate own resources between current spending and infrastructure investment and decide on borrowing under the expectation of federal bailouts. It is assumed that states' borrowing possibilities increase with the expectation of such bailouts...

This paper shows that an economic slump can induce a government to invest in fiscal capacity. Large negative income shocks stress the revenue raising capability of narrow tax bases, making an increase in tax base breadth desirable relative to its fixed implementation cost. A broader tax base...

States have soft budget constraints when they can expect a bailout by the federal government in the event of a financial crisis. This gives rise to incentives for unsound state fiscal policy. We test whether states with softer budget constraints have higher debt and deficits, receive more...

This paper assesses the interactions of horizontal fiscal equalisation schemes with debt policy by sovereign regional governments. Local public goods are either financed by debt or taxation. A horizontal equalisation scheme elevates regional public revenue disparities under horizontal and...

This paper develops a new measure of state and local fiscal sustainability called the "trend gap," which is based on socioeconomic and other fundamental factors and removes the short-term influence of the business cycle. The paper estimates the trend gap and finds that the nationwide per capita...

This study estimates the effect of U.S. legislative term limits on state revenue, general expenditure and its main components (welfare, highways, health, education, and state aid to local governments). Two alternative measures of term limits are tested: 1) an original term limit index and 2)...

We identify investor moral hazard in the German fiscal federation. Our identification strategy is based on a variable, which was used by the German Federal Constitutional Court as an indicator to determine eligibility of two German states (Länder) to a bail-out, the interest payments-to-revenue...

How much power to tax do really enjoy the seventeen new regional governments created in democratic Spain? What other sources of income do they dispose of? Which rules have been implemented for regulating their tax and non-tax sources of income and how are these rules influencing the behaviour of...