Panel Paper:
Does State-Level Monitoring of Local Fiscal Conditions Matter?
*Names in bold indicate Presenter
The time period before, during, and after the Great Recession provides a natural experiment for formally testing the efficacy of such measures. In particular, the paper proposes to undertake a difference-in-difference analysis of the efficacy of the North Caroline Local Government Commission in mitigating fiscal stress likely to be experienced by local governments during of economic downturn.
The Local Government Commission was established during the Great Depression of the 1930s. It monitors the fiscal behavior of local governments in several ways: by examining local financial reports to spot potential problems and recommend potential fixes; by maintaining a watch list of communities that are at risk for financial distress; and by stepping in if need be to manage the day-to-day operations of communities that are in actual fiscal distress.
South Carolina provides the basis for a diff-in-diff analysis of the effectiveness of such institutions. Specifically, drawing on a diff-in-diff analysis of the impact of intervention by regional federal reserve banks in the Great Depression, we specify and estimate a basic model of the form:
Yist=a + BFISC + POSTt+ deltardd(Fisc * Post) + E
Where:
YiSt = one of several measures of fiscal health; i = the city or county; S = the state in which the city or county is located; and t = year, t = 2005 to 2013.
FISC is = 1 if city or county i is located in North Carolina; and 0 if the city or county is located in Virginia or South Carolina
POSTt = 1 if t > 2007; and 0 otherwise.
The model will be estimated using data drawn from the Comprehensive Annual Financial Reports.
