Regional Effects of Federal Tax Shocks

33 Pages Posted: 4 Apr 2012

See all articles by Matthias Uhl

Matthias Uhl

University Marburg

Bernd Hayo

University of Marburg - School of Business & Economics

Date Written: April 3, 2012

Abstract

This paper studies regional output asymmetries following U.S. federal tax shocks. We estimate a vector autoregressive model for each U.S. state, utilizing the exogenous tax shock series recently proposed by Romer and Romer (2010) and find considerable variations: estimated output multipliers lie between –0.2 in Utah and –3.3 in Hawaii. Statistically, the difference between state and national output effect is significant in about half the U.S. states. Analyzing the determinants of differences in the magnitude of regional tax multipliers suggests that industry composition of output and socio-demographic characteristics help explain the observed asymmetry across U.S. states in the transmission of federal tax policy.

Keywords: fiscal policy, tax policy, narrative approach, U.S. states, regional effects, asymmetries in fiscal policy transmission

JEL Classification: E32, E62, H20, R10, R11

Suggested Citation

Uhl, Matthias and Hayo, Bernd, Regional Effects of Federal Tax Shocks (April 3, 2012). Available at SSRN: https://ssrn.com/abstract=2033638 or http://dx.doi.org/10.2139/ssrn.2033638

Matthias Uhl

University Marburg ( email )

Universitätsstrasse 24
Marburg, D-35032
Germany

Bernd Hayo (Contact Author)

University of Marburg - School of Business & Economics ( email )

Universitaetsstr. 24
Marburg, D-35032
Germany
++49(0)6421-28-23091 (Phone)
++49(0)6421-28-23193 (Fax)

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