- County governments in the United States play important roles in the tax collection and public service provisions. Thus, a better understanding of the local government finances is closely related to the welfares of residents. In this dissertation, I provide two essays: in the first essay, I examine the fiscal impacts of multiple hurricanes on the county government tax revenues, and in the second essay, I examine the potential correlation between the institutional characteristics of county governments and the spatially varying expenditure determination processes. The two essays contribute to current local government finance literature in the United States.
In the first essay, I investigate the fiscal impact of multiple hurricanes on county government tax revenues and the potential adaptation effect. I compare the changes in tax revenues before and after the multiple hurricane incidences to identify the fiscal impact of multiple hurricanes and the potential adaptation effect. I use the tax revenue data in the year 2002 and 2007. I define the years between 2003 and 2006 as the treatment period and I count the number of hurricanes each county experiences. Then, I divide the counties into two groups: if the number of hurricanes in a county during the treatment period is more than 1, I call it “Treatment”, and otherwise, I call it “Control”. I call the year before the treatment period, 2002, as the pre-treatment year and I call the year after the treatment period, 2007, as the post-treatment year. I find that the share of property tax in Treatment increases, mainly due to the 45 percent point more decreases in the sales tax of Treatment. However, when I look at the adaptation effect, I see that the share of property tax decreases, partly due to the decrease in the property tax, and partly due to the small decreases in sales tax and taxes on others. In summary, I show that the negative impact of multiple hurricanes on sales tax revenues and the impact is mitigated by the adaptation effects.
In the second essay, I provide one mechanism that suggests a potential correlation between the local institutional characteristics and the spatially varying local expenditure determination processes. Based on the microeconomics theory, I present a cost function that suggests the local government’s public service provision expenditure is a function of input price and the level of public service outputs. In the analysis, I use the county governments’ public expenditure data in 2017, count level average wage rate, public health measures, and the employment rates as the public service output variables. I firstly employ one of the spatially varying coefficient estimations (SVCM) approaches to estimate the cost function. The estimation results and the results of the following tests support the claim that there exist spatially varying processes in the cost functions of public service provision. Then, I analyze the correlation between the local institutional characteristics, such as the number of elected county officials and the degree of autonomy of county governments, with spatially varying coefficients of the cost function. The regression results suggest that the institutional characteristics are significantly correlated with the spatially varying coefficients of the cost function. In summary, I present evidence that the disparities in the local institutional characteristics could be one potential cause of the spatially varying processes in the local expenditure determination process.