Semester

Fall

Date of Graduation

1999

Document Type

Dissertation

Degree Type

PhD

College

Chambers College of Business and Economics

Department

Economics

Committee Chair

Russell S. Sobel.

Abstract

This dissertation explores the saving behavior of state governments in the context of the ability of states to weather recessionary periods. The first chapter of the dissertation discusses the role of savings as a policy option for state decision-makers in light of the fiscal constraints facing state governments, reviews the previous literature that has examined the savings behavior of state governments, and outlines the research agenda for the dissertation. Chapter 2 provides statistics on the post-World War II savings of states to explore recent trends in their savings behavior and discusses the data employed in the dissertation. The third chapter examines an implication of the common pool problem associated with public sector savings by investigating how anticipated future changes in the controlling parties of states' legislatures affect the current level of saving. The results provide evidence that state saving is adversely impacted by future changes in controlling political parties, suggesting that politically unstable states may be ill-prepared to deal with recessions relative to politically stable states. Chapter 4 of the dissertation examines the role that political stability and other factors have had on states' choices to adopt budget stabilization funds. The results provide evidence that states which have experienced more long-term political instability, have been severely hit by recessions, and have expenditure and/or tax limitation laws in place, are more likely to adopt a budget stabilization fund as an additional vehicle for saving. The final research chapter of the dissertation investigates the effectiveness of budget stabilization funds by examining how states' savings behavior has changed as a result of utilizing budget stabilization funds. The results from this chapter provide evidence that budget stabilization funds governed by explicit deposit and withdrawal rules can assist state decision-makers in saving and thus enhance a state's ability to mitigate recessions in the future. Chapter 6 provides a summary of the dissertation and discusses areas of future research investigating state saving and budget stabilization funds.

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