THE PRIVATE SECTOR IMPACT OF STATE AND LOCAL GOVERNMENT: HAS MORE BECOME BAD?

Early research suggests some increases in state and local government spending more than offset the negative effects of the tax increases needed to fund them. More recent research finds the growth of state and local government generally discourages private sector growth. Using panel data on private e...

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Bibliographic Details
Published in:Contemporary economic policy 2006-10, Vol.24 (4), p.548-562
Main Authors: TAYLOR, LORI L., BROWN, STEPHEN P. A.
Format: Article
Language:English
Subjects:
Budgets
Capital stock
Economic activity
Economic analysis
Economic aspects
Economic conditions
Economic growth
Economic impact analysis
Empirical tests
Employment
Equilibrium
Estimates
Federal states
Government spending
Growth rates
Higher education
Inventory
Jurisdiction
Local government
Manufacturing
Output rate
Private sector
Public economics
Public expenditure
State government
Studies
Tax increases
Tax rates
U.S.A
Unemployment
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Summary:Early research suggests some increases in state and local government spending more than offset the negative effects of the tax increases needed to fund them. More recent research finds the growth of state and local government generally discourages private sector growth. Using panel data on private employment, capital and output for the 48 contiguous states, the authors find that government size influences whether additional government helps or hinders private sector growth. The rapid growth of state and local government in the late 1980s likely outstripped the willingness to pay. With government growth moderating in the 1990s, however, the private sector response has become more favorable. (JEL H3, H4, R5)
ISSN:1074-3529
1465-7287
DOI:10.1093/cep/byl002