Whether State Fiscal Policy Affects State Economic Growth
نویسندگان
چکیده
Theory predicts that fiscal policy can affect economic growth by adjusting incentives for investment and labor as well as by distorting after-tax returns across sectors. This paper examines the effect of fiscal policy on growth rates first graphically, and then through two models, one of which disaggregates fiscal policy variables. I find evidence that increased size of government is negatively correlated with growth and that transfer payments and income taxes are especially harmful, while public capital expenditure can substantially increase growth.
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