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Simulations of state government fiscal policy: The balanced budget multiplier

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Abstract

State governments are becoming increasingly aware that fiscal policy is a method of affecting the aggregate level of economic activity in the state. This study analyzes the economic effects of the balanced budget multiplier within the regional context. Using a simple model of a regional economy, the study shows that factor migration and state-federal tax interactions eliminate the possibility of a balanced budget multiplier for the region. In addition, the impact of policy on employment and disposable personal income, primary indications of regional welfare, may be assymetrical. A series of simulations employing an econometric model of Alaska illustrates the likely magnitude of effects upon a region.

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References

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Authors and Affiliations

  1. Institute of Social and Economic Research, University of Alaska, USA

    Oliver Scott Goldsmith (Associate Professor of Economics)

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  1. Oliver Scott Goldsmith
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Goldsmith, O.S. Simulations of state government fiscal policy: The balanced budget multiplier. Ann Reg Sci 18, 57–65 (1984). https://doi.org/10.1007/BF01291332

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  • DOI: https://doi.org/10.1007/BF01291332

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