Do local governments save and spend across budget cycles? evidence from North Carolina

Wen Wang, Yilin Hou

Research output: Contribution to journalArticle

34 Scopus citations

Abstract

The fiscal crisis encountered by state-local governments since 2008 has again made prominent the issue of how to better prepare for and stabilize expenditures during recessions. Does the stabilization function of government, and its theory, still hold? Previous studies focus on federal and state levels; only a few look at local governments. This article explores whether localities save and spend across the boom-bust cycle; we intend to identify the determinants of local government savings and estimate the impact of savings on stabilizing expenditures. Unlike some early evidence that shows countercyclical stabilization properties of local unreserved general fund balance, the empirical results of our study on North Carolina counties do not support the stabilization role by localities. This study carries timely and important implications for state/local policy making and financial operations; it also adds to the literature on the stabilization function of government.

Original languageEnglish (US)
Pages (from-to)152-169
Number of pages18
JournalAmerican Review of Public Administration
Volume42
Issue number2
DOIs
StatePublished - Mar 2012
Externally publishedYes

Keywords

  • fund balance policy
  • local financial management
  • stabilization function of government

ASJC Scopus subject areas

  • Sociology and Political Science
  • Public Administration
  • Marketing

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