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Separation of Powers and the Size of Government in the U.S. States

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  • Leandro De Magalhães
  • Lucas Ferrero

Abstract

According to our model effective 'budgetary' separation of power occurs in the states with the line-item veto when the Governor is not aligned with the Legislature. Only then is the Legislature, which approves the budget and sets the tax level, not the full residual claimant of a tax release. The tax level is determined by the overlap between the supporters of the Governor and the supporters of the legislative majority. The model generates a discontinuous and non-linear relationship between the tax level and the degree of alignment between Governor and Legislature. We find support in the data for this non-linear relationship and show that the discontinuity can be interpreted as a causal effect.

Suggested Citation

  • Leandro De Magalhães & Lucas Ferrero, 2012. "Separation of Powers and the Size of Government in the U.S. States," The Centre for Market and Public Organisation 12/285, The Centre for Market and Public Organisation, University of Bristol, UK.
    • Handle: RePEc:bri:cmpowp:12/285
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    More about this item

    Keywords

    Separation of powers; divided government; line-item veto; tax level; semiparametric; regression discontinuity design;
    All these keywords.

    JEL classification:

    • H00 - Public Economics - - General - - - General
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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