State Fiscal Policies and Financial Condition: A Panel Data Analysis of U.S. State Tax and Expenditure Limits and Rainy-Day Funds
Ljubinka Andonoska & Haohua Xu
What the paper says
Using data from the states’ annual comprehensive financial reports for the period 2003 to 2018, the authors apply a dynamic panel model frame to test how state tax and expenditure limitations (TELs) and rainy-day funds (RDFs) affect key aspects of the state fiscal condition. Guided by the fiscal illusion theory, we hypothesize that TELs and RDFs will affect various short-term solvency indicators but will not have a significant impact on pension and long-term solvency indicators. The study provides mixed empirical evidence, cautioning that these relations are complex. The results provide empirical evidence supporting most of the hypotheses related to short-term solvencies, such as cash and budgetary solvencies. In addition, the study finds that neither tax nor expenditure limitations have a significant impact on the net asset ratio and the long-term ratios. Similarly, there is evidence that TELs and RDFs do not affect the two pension solvency ratios. This is probably the first study to provide a dynamic panel model to assess how two major state fiscal institutions influence various state government’s short-term and long-term fiscal solvency conditions.
Evidence weight
Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40
| F · citation impact | 0.50 × 0.4 = 0.20 |
| M · momentum | 0.50 × 0.15 = 0.07 |
| V · venue signal | 0.50 × 0.05 = 0.03 |
| R · text relevance † | 0.50 × 0.4 = 0.20 |
† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.