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Extending differences-in-differences frameworks to Granger equations: evidence from cutback management during three recessions

Christian Buerger (O'Neill School of Public and Environmental Affairs, Indianapolis, Indiana, USA)
Riley M. Sandel (Wagner School, New York University, New York, New York, USA)
Vincent Reitano (School of Public Affairs and Administration, Western Michigan University, Kalamazoo, Michigan, USA)
Michelle L. Lofton (School of Public and International Affairs, University of Georgia, Athens, Georgia, USA)
Peter Jones (Department of Political Science and Public Administration, The University of Alabama at Birmingham, Birmingham, Alabama, USA)

International Journal of Public Sector Management

ISSN: 0951-3558

Article publication date: 5 July 2021

Issue publication date: 26 October 2021

137

Abstract

Purpose

The authors show how to extend difference-in-differences (DiD) frameworks to Granger (1969) equations, a technique that tests for the parallel trends assumption and measures changes in effect sizes over time. To illustrate how these equations work, they apply them to state cutback management decisions in three recessions.

Design/methodology/approach

This study applies quantitative methods. The authors estimate DiD frameworks as Granger (1969) equations.

Findings

After empirically analyzing recessions that started in 1990, 2001 and 2007, the authors find that states deepen expenditure cuts when economic declines lengthen and tend to make large cuts to specific expenditure categories instead of spreading cuts equally over all service areas.

Originality/value

The authors offer two contributions of methodological value. First, they introduce the estimation of Granger equations to the study of topics in public administration. Second, they show how this technique helps to evaluate the impact of economic declines on state spending. By instituting these contributions, they offer a unique way of analyzing cutback management decisions.

Keywords

Citation

Buerger, C., Sandel, R.M., Reitano, V., Lofton, M.L. and Jones, P. (2021), "Extending differences-in-differences frameworks to Granger equations: evidence from cutback management during three recessions", International Journal of Public Sector Management, Vol. 34 No. 6, pp. 688-705. https://doi.org/10.1108/IJPSM-09-2020-0257

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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