IS LOCAL GOVERNMENT REVENUE RESPONSE TO FEDERAL AID SYMMETRICAL? EVIDENCE FROM PENNSYLVANIA COUNTY GOVERNMENTS IN AN ERA OF RETRENCHMENT

William F. Stine

107 citations0/0 files storedNational Tax Journal

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Local Government Finance and Decentralization Fiscal Policies and Political Economy Economic Growth and Fiscal Policies

Abstract

Previous empirical studies have made little attempt to test whether the fiscal response to intergovernmental aid is asymmetric. This paper tests the asymmetric response hypothesis for 66 Pennsylvania county governments over the 1978-88 period. This marked a period of retrenchment in which counties experienced frequent annual reductions in federal aid. The local government revenue response to federal aid was found to be asymmetric. The reduction in federal aid induced a reduction in own-source revenue. The results support the notion that taxpayers prefer fiscal restraint when permanent loss of aid occurs.

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1971Bureaucracy and Representative Government 1983A Theory of Competition Among Pressure Groups for Political Influence 1958The Affluent Society 1960Why The Government Budget Is Too Small in a Democracy 1966Economics of the property tax 1984A positive model of tax structure

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