Granger causes state tax revenue is 1.842. Thus, there is one-way Granger causality running from revenue to expenditure. The test was performed using annual tax revenue and expenditure data from 1952 to 1990. LMTR is the log of the effective tax rate, measured as total tax collections divided by Massachusetts personal income. The t-statistics are in parentheses.
All variables are significant at the five-percent level.
EMP is total nonagricultural employment in Massachusetts. RMPI is real Massachusetts personal income. Both variables are significant at the one-percent level. The algorithm is similar to the Cochrane-Orcutt technique. The final value of the r is reported in both cases.