1 “State effects” are separate intercepts estimated in the regression models for each of the 50 states (plus the District of Columbia). They may be viewed as average differences in state spending over the entire period (1977-2000), after controlling for the linear effects of the included variables, such as fiscal capacity and unemployment. State effects may, for example, be the result of differences in state political cultures, which were not directly measured in this study. “Year effects” are dummy or binary variables representing each year of the time series. A year effect indicates an average difference in spending across all states compared to some baseline year. A significant year effect may result from a national policy change or some other factor operating on all states but not fully measured by the independent variables included in the regression.
2 However, when the equations were estimated for each fiscal capacity quartile, only the wealthiest quartile (Quartile 1) showed a negative and significant relationship.
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