The effect of state and local taxes on economic growth: A spatial dynamic panel approach

This study revisits the growth effects associated with subnational fiscal policy. This, to my knowledge, is the first attempt to address the potential endogeneity of fiscal policy control variables. More specifically, the analysis used in this study implements a general method of moments spatial dynamic panel data model estimation procedure to arrive at a more refined set of estimates for the growth effects attributed to state and local fiscal policy. In deriving the estimable equation, this study extends a factor market approach for modelling regional output into a strategic interaction framework.