Copycatting: Fiscal Policies of States and Their Neighbors

37 Pages Posted: 3 Aug 2000

See all articles by Anne Case

Anne Case

Princeton University - Research Program in Development Studies; National Bureau of Economic Research (NBER)

James R. Hines Jr.

University of Michigan; NBER

Harvey S. Rosen

Princeton University - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 1989

Abstract

This paper formalizes and tests the notion that state governments' expenditures depend on the spending of similarly situated states. We find that even after allowing for fixed state effects, year effects, and common random effects between neighbors, as state government's level of per capita expenditure is positively and significantly affected by the expenditure levels of its neighbors. Ceteris paribus, a one dollar increase in a state's neighbors' expenditures increases its own expenditure by over 70 cents.

Suggested Citation

Case, Anne and Hines, James Rodger and Rosen, Harvey S., Copycatting: Fiscal Policies of States and Their Neighbors (July 1989). NBER Working Paper No. w3032. Available at SSRN: https://ssrn.com/abstract=232066

Anne Case (Contact Author)

Princeton University - Research Program in Development Studies ( email )

Woodrow Wilson School
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Princeton, NJ 08544
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609-258-2177 (Phone)
609-258-5974 (Fax)

National Bureau of Economic Research (NBER)

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James Rodger Hines

University of Michigan ( email )

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United States

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvey S. Rosen

Princeton University - Department of Economics ( email )

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Princeton, NJ 08544
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

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