Unless otherwise noted, the following raw data are taken from the National Income and Product Accounts (NIPA) Tables 
released by the Bureau of Economic Analysis. All fiscal variables are for state and local governments.


Consumption. Consumption, C, is defined as the sum of nominal personal consumption expenditures on nondurable goods (Table 1.1.5, line 5) 
and services (Table 1.1.5, line 6).

Investment. Investment, I, is defined as the sum of nominal personal consumption expenditures on durable goods (Table 1.1.5, line 4) and 
gross private domestic investment (Table 1.1.5, line 7).

Income tax revenue. Income tax revenue is defined as the sum of nominal personal current taxes (NIPA Table 3.3 line 3), corporate income taxes (NIPA Table 3.3 line 10), 
and contributions for social insurance (NIPA Table 3.3 line 11) by S\&L governments.

Consumption tax revenue. Consumption tax revenue is defined as the nominal taxes on production and imports (NIPA Table 3.3 line 6) by S\&L governments.

Government purchases of goods. Government purchases of goods is defined as the sum of nominal government consumption expenditures and gross investment (NIPA Table 3.9.5 line 33), 
less compensation of general government employees (NIPA Table 3.10.5 line 50) by S\&L governments.

Government debt. Government debt, B, is the credit market debt in nominal values outstanding by S\&L governments, excluding employee retirement funds in the database of FRED Economic Data by Federal Reserve Bank of St. Louis. 
The series on municipal securities and loans (Tables F.211 and L.211 of Financial Accounts of the United States by the Federal Reserve Board) have been revised from 2004Q1 forward to reflect a change in data sources. 
To account for this change, which results in a jump in the S\&L debt level of 2004Q1 by \$771 billion, we use the growth rates of the original debt data from 1984 to 2003 and the debt level of the 2004Q1 to project backwards 
to approximate S\&L debt levels between 1984 and 2003 under the revised data sources.

Real private wage rate. Real private wage rate is constructed from private compensation, scaled by the CPI and private hours worked. Private compensation is the sum of nominal wages and salaries (w\&s) for private industries (NIPA Table 2.1 line 4) 
and supplements to w\&s for private industries. Since supplements to w\&s for private industries are not directly available among NIPA tables, we compute it by subtracting supplements to w\&s of general government employees 
(the difference between compensation and w\&s to general government employees, NIPA Table 3.10.5 line 4 and Table 2.1, line 5) from total supplements to w\&s (NIPA Table 2.1 line 6). Private hours worked are computed as nonfarm business hours less 
hours worked by government enterprise employees and nonfarm unpaid family workers (BLS).

Real public wage rate. Real public wage rate is constructed from compensation of general government employees (NIPA Table 3.10.5, line 50), scaled by the CPI and hours worked for S\&L governments. 
Hours worked for S\&L governments hours are approximated by multiplying total government hours worked (BLS) with the share of S\&L government employees to total government employees (BLS). 

Private employment. Private employment is defined as the index (2009Q3=100) for private-sector employment, constructed from as nonfarm business employees less employees of government enterprises and nonfarm proprietors (BLS).

Inflation. Inflation is constructed using the index for the GDP price deflator (NIPA Table 1.1.4 line 1).

Nominal interest rate. The nominal interest rate is defined as the federal funds rate from the Board of Governors of the Federal Reserve System. The quarterly data are constructed from the average of monthly effective rates and divided by 4.

Unemployment rate. The unemployment rate is defined as the number of unemployed divided by the labor force (BLS's Current Employment Statistics survey). The quarterly data are constructed from the average of monthly civilian unemployment rates.



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Definitions of Observable Variables

The variable X is defined by making the following transformation to variable x:

	X = ln (x/Popindex)*100 

where 
	Popindex: the index of Pop (defined below), constructed such that 2009Q3 = 1;
	Pop: Civilian noninstitutional population in thousands, ages 16 years and over, seasonally adjusted
	(from the Bureau of Labor Statistics).

x = consumption, investment, income and consumption tax revenues, government purchases of goods, and government debt. The real private and public
wage rates are defined in the same way, except that they are is not divided by the total population. The private employment is divided by the total population.
We convert all series, except for private employment, inflation, the nominal interest rate, and the unemployment rate into growth rates.











