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Federal tax policies, congressional voting and natural resources

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  • Fidel Perez‐Sebastian
  • Ohad Raveh

Abstract

Can abundance of natural resources affect legislators' voting behaviour over federal tax policies? We construct a political economy model of a federalized economy with district heterogeneity in natural resource abundance. The model shows that representatives of natural resource‐rich districts are more (less) willing to vote in favour of federal tax increases (decreases). This occurs because resource‐rich districts are less responsive to federal tax changes due to the immobile nature of their natural resources. We test the model's predictions using data on roll‐call votes in the US House of Representatives over the major federal tax bills initiated during the period of 1945–2003, in conjunction with the presence of active giant oil fields in US congressional districts. Our identification strategy rests on plausibly exogenous giant oil field discoveries and exploitation and narrative‐based aggregate federal tax shocks that are exogenous to individual congressional districts and legislators. We find that: (i) resource‐rich congressional districts are less responsive to changes in federal taxes and (ii) representatives of resource‐rich congressional districts are more (less) supportive of federal tax increases (decreases), controlling for legislator, congressional district and state indicators. Our results indicate that resource richness is approximately half as dominant as the main determinant, namely party affiliation, in driving legislators' voting behaviour over federal tax policies. Politiques fiscales fédérales, vote au congrès et ressources naturelles. L'abondance de ressources naturelles peut‐elle avoir une incidence sur les comportements de vote relativement aux politiques fiscales fédérales ? Nous avons élaboré un modèle de politique économique basé sur une économie fédéralisée au sein de laquelle des disparités régionales en matière de richesses naturelles demeurent. Ce modèle montre que les élus des régions riches en ressources naturelles sont moins (davantage) enclins à voter des hausses (baisses) de taxes fédérales. Cela est dû au fait que les régions richement dotées en ressources naturelles sont moins sensibles aux variations de la fiscalité fédérale en raison de la nature immobile desdites ressources. Nous avons testé les prévisions de ce modèle grâce aux données des votes par appel nominal au sein de la Chambre des représentants des États‐Unis pour tous les projets de loi sur les taxes fédérales initiés entre 1945 et 2003, et ce conjointement avec la présence de champs pétrolifères géants dans les circonscriptions américaines. Notre stratégie d'identification s'appuie sur les découvertes et l'exploitation de champs pétrolifères géants et vraisemblablement exogènes, et des chocs fiscaux fédéraux d'ensemble extérieurs aux circonscriptions individuelles et leurs législateurs. Nous avons remarqué que : i) les circonscriptions riches en ressources naturelles sont moins sensibles aux variations de taxes fédérales, que ii) les élus des circonscriptions riches en ressources naturelles sont davantage (moins) favorables aux augmentations (baisses) de taxes fédérales en pesant sur le législateur, la circonscription et les indicateurs d'état. Nos résultats indiquent que la richesse en ressources naturelles est environ moitié moins prédominante que l'affiliation à un parti politique pour motiver le vote des législateurs en matière de taxes fédérales.

Suggested Citation

  • Fidel Perez‐Sebastian & Ohad Raveh, 2019. "Federal tax policies, congressional voting and natural resources," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(3), pages 1112-1164, August.
    • Handle: RePEc:wly:canjec:v:52:y:2019:i:3:p:1112-1164
    DOI: 10.1111/caje.12404
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    Cited by:

    1. Rick Van der Ploeg & Fidel Perez-Sebastian & Ohad Raveh, 2019. "Oil Discoveries and Protectionism," Economics Series Working Papers 895, University of Oxford, Department of Economics.
    2. Raveh, Ohad & Zhang, Yan, 2022. "The Long-Term Health Effects of Oil Discoveries: Evidence from China," MPRA Paper 114059, University Library of Munich, Germany.
    3. Perez-Sebastian, Fidel & Raveh, Ohad & van der Ploeg, Frederick, 2021. "Oil discoveries and protectionism: Role of news effects," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).

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    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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