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Walking a Tightrope: Are U.S. State and Local Governments on a Fiscally Sustainable Path?
Author(s) -
Zhao Bo,
Coyne David
Publication year - 2017
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/pbaf.12168
Subject(s) - panel data , fiscal sustainability , state (computer science) , sustainability , economics , path (computing) , business , fiscal policy , public economics , economic policy , macroeconomics , econometrics , algorithm , computer science , programming language , ecology , biology
This paper develops a new measure of state and local fiscal sustainability called the “trend gap,” which is estimated from a panel data model and removes the short‐term influence of business cycles. The paper finds that the nationwide trend gap has grown over the past three decades. Education and social services and income maintenance programs have played a major role in the growth of the trend gap, while public pensions have become increasingly important in driving up the trend gap. The paper projects that the trend gap will continue to grow through 2026 in the absence of policy changes.