Fiscal Centralization: Theory and Evidence from the Great Depression
American Economic Journal: Economic Policy
vol. 10,
no. 2, May 2018
(pp. 39-61)
(Complimentary)
Abstract
The Great Depression produced a profound and lasting influence on the structure of US government. This paper studies theoretically and empirically the increased centralization of revenues and expenditures by the states relative to local governments during this period. A model of property and sales taxation and tax delinquency is introduced. In the model, the income decline of the Depression causes a rise in property tax delinquency and leads to a shift toward sales taxation and fiscal centralization by the states. Empirical evidence based on cross-state variation in the severity of the Depression is consistent with the model's key predictions.Citation
Coen-Pirani, Daniele, and Michael Wooley. 2018. "Fiscal Centralization: Theory and Evidence from the Great Depression." American Economic Journal: Economic Policy, 10 (2): 39-61. DOI: 10.1257/pol.20150131Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H71 State and Local Taxation, Subsidies, and Revenue
- H72 State and Local Budget and Expenditures
- H77 Intergovernmental Relations; Federalism; Secession
- N12 Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: U.S.; Canada: 1913-
- N42 Economic History: Government, War, Law, International Relations, and Regulation: U.S.; Canada: 1913-
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