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

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

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Author(s)

  • Wen Wang
  • Yilin Hou

Detail(s)

Original languageEnglish
Pages (from-to)152-169
Journal / PublicationAmerican Review of Public Administration
Volume42
Issue number2
Publication statusPublished - Mar 2012

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. © SAGE Publications 2012.

Research Area(s)

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