If you build it, will they come?: fiscal federalism, local provision of public tourist amenities, and the Vision Iowa fund

Date
2011-10-09
Authors
Artz, Georgeanne
Premkumar, Deepak
Quackenbush, Austin
Orazem, Peter
Artz, Georgeanne
Orazem, Peter
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Economics
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Abstract

The philosophy of fiscal federalism presumes that local communities will under- or over-provide public amenities in the presence of externalities. We test this hypothesis using data from Vision Iowa, a state program which provided partial funding to communities to build tourist attractions. We find a 1% increase in investment increased county taxable retail sales 0.9%. The State's return, from program-induced sales tax revenue, averaged 9.2% annually. Local communities' returns averaged 0.9% and we find a significant increase in surrounding areas' sales. This suggests that without state subsidies, communities would undersupply public amenities aimed at attracting visitors.

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amenities, fiscal federalism, sales tax, externalities, public goods, local government, spillovers, subsidy, externality, spillover, amenity, retail sales
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