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Joe Stone and Jo Anna Gray
''Ricardian equivalence for sub-national states''
( 2006, Vol. 5 No.1 )
The authors test Ricardian equivalence within an endogenous growth model for U.S. states, which have high rates of migration relative to most countries. Results are consistent with both Ricardian equivalence and endogenous growth, despite the relative ease of migration. Increases in productive government expenditures increase long-run real growth by the same amount, for example, whether financed by taxes or bonds. State rules limiting the use of bond financing may play a role in supporting Ricardian equivalence. The study provides the first explicit test of Ricardian equivalence for sub-national states in the context of an endogenous growth model.
Keywords: endogenous growth
E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General
Manuscript Received : Jan 04 2006 Manuscript Accepted : Jan 09 2006

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