Rules versus home rule: Local government responses to negative revenue shocks

Arbeitspapier

Local governments rely heavily on sales tax revenue. We use national bankruptcies of big-box retail chains to study sudden plausibly exogenous revenue shortfalls. Treated localities respond by reducing spending on law enforcement and administrative services. We further study how cities with different degrees of autonomy vary in their response. Cities in home rule states react more swiftly by raising taxes or issuing bonds. A regression discontinuity analysis of cities in Illinois emphasizes that this effect of local autonomy is causal. Home rule cities do not abuse their discretion: their bond ratings are more likely to be strong.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: AEI Economics Working Paper ; No. 2017-15

Classification and Topics

• Classification: Wirtschaft
• Subject: State taxes ; revenue ; Local government

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Veuger, Stan ; Shoag, Daniel ; Tuttle, Cody
• Event: Veröffentlichung
• (who): American Enterprise Institute (AEI)
• (where): Washington, DC
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/280568
• Last update: 10.03.2025, 11:42 AM CET