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Roy Bahl:

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The objective of this paper is to provide a theoretical framework for examining interstate variations in the benefits which accrue from the federal budgetary process. Unlike most traditional analyses, which center on the relative magnitude of net monetary flows between the federal and state governments, this paper incorporates consideration of both a broader definition of federal aid and the notion of interstate variations in the opportunity cost of making use of federal funds. Empirical estimates of such a benefit distribution are presented, but the assumptions required to permit testing are necessarily heroic. Nevertheless, the substantial difference betwen the interstate distribution of benefits as defined in this paper, and that of net monetary flows, suggests that the latter is likely to present a better picture of the intentions of budget-makers than of the real effects of budgetary policy.


Originally published in Bahl, Roy W., And J. J. Warford. “Interstate Distribution of Benefits from the Federal Budgetary Process.” National Tax Journal 24, no. 2 (1971): 169–76.

Posted with the permission of the National Tax Association.

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