The impact of revenue diversification and economic base on state revenue stability

The impact of revenue diversification and economic base on state revenue stability Revenue stability has been an important policy objective for state government administrators. This study explores whether the effect of revenue diversification on revenue volatility varies in terms of the instability of a state’s economic base. To empirically answer the question, an econometric model that explores a series of factors that could affect revenue stability is estimated using panel data on 47 state governments during the years 1986-2004. The findings indicate that revenue diversification reduces revenue instability for states that are economically stable. However, the revenue-stabilizing effect of diversification diminishes as the economic instability of a state increases. Although revenue diversification has been advocated as a desirable practice for sub-national governments, this study indicates that the benefits of revenue diversification are not always clear and its practice should be moderated by the conditions of a state’s economic base. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Public Budgeting, Accounting & Financial Management Emerald Publishing

The impact of revenue diversification and economic base on state revenue stability

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1096-3367
DOI
10.1108/JPBAFM-24-01-2012-B003
Publisher site
See Article on Publisher Site

Abstract

Revenue stability has been an important policy objective for state government administrators. This study explores whether the effect of revenue diversification on revenue volatility varies in terms of the instability of a state’s economic base. To empirically answer the question, an econometric model that explores a series of factors that could affect revenue stability is estimated using panel data on 47 state governments during the years 1986-2004. The findings indicate that revenue diversification reduces revenue instability for states that are economically stable. However, the revenue-stabilizing effect of diversification diminishes as the economic instability of a state increases. Although revenue diversification has been advocated as a desirable practice for sub-national governments, this study indicates that the benefits of revenue diversification are not always clear and its practice should be moderated by the conditions of a state’s economic base.

Journal

Journal of Public Budgeting, Accounting & Financial ManagementEmerald Publishing

Published: Mar 1, 2012

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