State and Local Government Choices in Fiscal Redistribution

Abstract

Economists have devoted relatively little attention to explaining why some state and local governments choose more progressive fiscal instruments than others. This paper provides an empirical model to identify the determinants of income redistribution as a budgetary choice, and estimates the strength of these determinants with state-local government panel data for a 21 year period. We find emphasis on redistributive expenditures in less urbanized and poorer states, and more emphasis on redistributive revenues in states that are less urbanized, poorer, and with larger elderly and black populations. We find that state-local governments use revenue and expenditure distribution instruments as complements.