Details

Autor(en) / Beteiligte

• Carlino, Gerald
• Drautzburg, Thorsten
• Inman, Robert
• Zarra, Nicholas

Titel

Partisanship and Fiscal Policy in Economic Unions: Evidence from US States

Ist Teil von

• The American economic review, 2023-03, Vol.113 (3), p.701-737

Erscheinungsjahr

2023

Link zum Volltext

Quelle

Alma/SFX Local Collection

Beschreibungen/Notizen

• Partisanship of state governors affects the efficacy of US federal fiscal policy. Using close election data, we find partisan differences in the marginal propensity to spend federal intergovernmental transfers: Republican governors spend less than Democratic governors. Correspondingly, Republican-led states have lower debt, (delayed) lower taxes, and initially lower economic activity. A New Keynesian model of partisan states in a monetary union implies sizable aggregate effects: The intergovernmental transfer impact multiplier rises by 0.58 if Republican governors spend like Democratic governors, but due to delayed tax cuts, the long-run multiplier is higher with more Republican governors, generating an intertemporal policy trade-off. (JEL D72, E12, E62, H71, H72, H74, H77)