Document Type

Working Paper

Publication Date


Working Paper Number

WP #11018, October 2011


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.

Publication Status

Published in Review of Regional Studies, Vol. 43 no. 2,3 (Winter 2013): 155-173.

JEL Classification

H2, H4, H7

File Format



33 pages

Included in

Economics Commons