Template-Type: ReDIF-Paper 1.0
Author-Name: Alexander G. James
Author-Name-First: Alexander
Author-Name-Last: James
Author-Email:  alex.james@uaa.alaska.edu
Author-Workplace-Name: Department of Economics and Public Policy, University of Alaska Anchorage
Title: U.S. State Fiscal Policy and Natural Resources
Abstract: An analytical framework predicts that, in response to an exogenous increase in resource-based government revenue, a benevolent government will partially substitute away from taxing income, increase spending and save. Fifty-one years of U.S.-state level data are largely consistent with this theory. A baseline fixed effects model predicts that a $1.00 increase in resource revenue results in a $0.25 decrease in non-resource revenue, a $0.43 increase in spending and a $0.32 increase in savings. Instrumenting for resource revenue reveals that a positive revenue shock is largely saved and the rest is transferred back to residents in the form of lower non-resource tax rates. 
Creation-date: 2014-08 
File-URL: http://www.econpapers.uaa.alaska.edu/RePEC/ala/wpaper/ALA201402.pdf
File-Format: Application/pdf
Classification-JEL: Q38, H20
Keywords: Severance Tax, Fiscal Policy, Natural Resources
Publication-Status: Forthcoming in the American Economic Journal: Economic Policy
Number: 2014-02
Handle: RePEc:ala:wpaper:2014-02