Aggregate responses to fiscal policies

The three chapters of this thesis analyze the behavioral impact of government fiscal policies.In the first chapter, an econometric model of state manufacturing job growth from 1981-1996 is estimated, to quantify the effect of "apportionment formulas" that states use to determine the taxable income of multi-state firms. This study uses a more accurate measure of the corporate income tax rate, and more controls for other relevant tax and nontax factors, than previous panel studies of the same issue. The effective tax rate on the property and payroll factors used in the apportionment formula is found to have a significant negative impact on job growth, while the effective rate on the sales factor has an uncertain effect. Specifically, an average state that switches from a traditional three-factor formula to a double-weighted sales factor (as many states have done in recent decades) can expect to add manufacturing jobs each year equal to just under 0.1% of the state's total employment in the prior year, all else equal. Other taxes that initially fall on business are also found to hamper job growth.The second chapter proposes a method of constructing an alternative to the top statutory corporate income tax rate as a measure of the tax's burden in cross-state empirical studies, as the top rate ignores other important provisions. As an example, the ratio of normalized revenue collections to the top statutory rate (a breadth measure) is regressed on a set of policy indicators and control variables for a panel of states from 1978-1999, and the coefficients used to construct an effective-rate measure which is then substituted for the statutory rate that was used in a previous empirical study. The results suggest that the failure to accurately measure tax incentives can bias the estimated behavioral responses.The last chapter uses a national cross-section of counties to estimate the impact of federal spending on the 2000 presidential election. Results suggest that increasing a county's veterans' payments by...