Mahdavi, Saeid; Westerlund, Joakim - College of Business, University of Texas-San Antonio
We re-examine the tax-spending nexus using, for the first time, a panel of fifty US state-local government units over the period 1963-97 and panel techniques that allow for cross-sectional dependence. We find that, unlike tax revenues, expenditures adjust to revert back to a long-term...