This study examines the effect of local and state fiscal autonomy on the poverty rate in the U.S. from 1980-2000. The findings are that the gap between own revenues and own expenditures, known as Vertical Imbalances, has an optimal level at which the negative influence on poverty is at its maximum. Shifts along the Vertical Imbalances curve towards the optimal value cause reductions in the poverty rate by hundredths of a percent. Convergence towards the optimal Vertical Imbalances value is still recommended as a reduction in poverty could be achieved by incurring little to no economic cost.
Valaris, Nicholas, "Fiscal Decentralization and Its Effect on Poverty Evidence from Panel Data on the lower 48 American States" (2012). Capstone Projects-Economics. Paper 2.