US state and local fiscal policies and non-metropolitan area economic performance: A spatial equilibrium analysis

Faced with declining economic bases, many non-metropolitan areas find themselves balancing the need to be cost-competitive in terms of lower taxes against the need for provision of valued government services. Using a spatial equilibrium framework, this study econometrically examines the nexus between US state and local fiscal policies and non-metropolitan county growth in earnings and housing rents during the 1990s. The results suggest that state and local fiscal characteristics significantly influenced firm and household location. Some characteristics could be clearly identified as having dominant firm profit effects, while numerous others were identified as having household amenity effects.