IDEAS home Printed from https://ideas.repec.org/p/fip/fedgif/500.html
   My bibliography  Save this paper

Political competition, causal relationships between taxes and spending, and their influence on government size: evidence from state-level data

Author

Listed:
  • Diane Lim Rogers
  • John H. Rogers

Abstract

Theories of fiscal illusion and political competition have different implications for (i) the causal relationships between taxes and spending, and (ii) government size. These are tested using data from u.s. states from 1950 to 1990. We find evidence that greater political competition generally encourages bigger government, the Democratic Party is associated with bigger government, and state governments which \"tax first, spend later\" are more likely to be large. Other factors related to the fiscal illusion and political competition theories also appear to be important determinants of government size.

Suggested Citation

  • Diane Lim Rogers & John H. Rogers, 1995. "Political competition, causal relationships between taxes and spending, and their influence on government size: evidence from state-level data," International Finance Discussion Papers 500, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:500
    as

    Download full text from publisher

    File URL: http://www.federalreserve.gov/pubs/ifdp/1995/500/default.htm
    Download Restriction: no
    File URL: http://www.federalreserve.gov/pubs/ifdp/1995/500/ifdp500.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hoover, Kevin D & Sheffrin, Steven M, 1992. "Causation, Spending, and Taxes: Sand in the Sandbox or Tax Collector for the Welfare State?," American Economic Review, American Economic Association, vol. 82(1), pages 225-248, March.
    2. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1989. "The Revenues-Expenditures Nexus: Evidence from Local Government Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 415-429, May.
    3. Rubinfeld, Daniel L., 1987. "The economics of the local public sector," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 11, pages 571-645, Elsevier.
    4. Dennis Mueller & Peter Murrell, 1986. "Interest groups and the size of government," Public Choice, Springer, vol. 48(2), pages 125-145, January.
    5. William Baber & Pradyot Sen, 1986. "The political process and the use of debt financing by state governments," Public Choice, Springer, vol. 48(3), pages 201-215, January.
    6. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-971, October.
    7. Timothy Besley & Anne Case, 1995. "Does Electoral Accountability Affect Economic Policy Choices? Evidence from Gubernatorial Term Limits," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 769-798.
    8. John Mikesell, 1978. "Election periods and state tax policy cycles," Public Choice, Springer, vol. 33(3), pages 99-106, January.
    9. von Furstenberg, George M & Green, R Jeffrey & Jeong, Jin-Ho, 1986. "Tax and Spend, or Spend and Tax?," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 179-188, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fox, William F. & Gurley, Tami, 2006. "Will consolidation improve sub-national governments ?," Policy Research Working Paper Series 3913, The World Bank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Westerlund, Joakim & Mahdavi, Saeid & Firoozi, Fathali, 2011. "The tax-spending nexus: Evidence from a panel of US state-local governments," Economic Modelling, Elsevier, vol. 28(3), pages 885-890, May.
    2. Moisio, Antti, 2000. "Spend and Tax or Tax and Spend? Panel Data Evidence from Finnish Municipalities during 1985 - 1999," Discussion Papers 242, VATT Institute for Economic Research.
    3. A. Phiri, 2019. "Asymmetries in the revenue–expenditure nexus: new evidence from South Africa," Empirical Economics, Springer, vol. 56(5), pages 1515-1547, May.
    4. Pierre-Yves Hénin, 1997. "Soutenabilité des déficits et ajustements budgétaires," Revue Économique, Programme National Persée, vol. 48(3), pages 371-395.
    5. Ghartey, Edward E., 2008. "The budgetary process and economic growth: Empirical evidence of the Jamaican economy," Economic Modelling, Elsevier, vol. 25(6), pages 1128-1136, November.
    6. Bradley T. Ewing & James E. Payne & Mark A. Thompson & Omar M. Al‐Zoubi, 2006. "Government Expenditures and Revenues: Evidence from Asymmetric Modeling," Southern Economic Journal, John Wiley & Sons, vol. 73(1), pages 190-200, July.
    7. Ali F. Darrat, 1998. "Tax and Spend, or Spend and Tax? An Inquiry into the Turkish Budgetary Process," Southern Economic Journal, John Wiley & Sons, vol. 64(4), pages 940-956, April.
    8. Michele Salvi & Christoph A. Schaltegger, 2023. "Tax more or spend less? Historical evidence from Switzerland’s federal budget plans," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(3), pages 678-705, June.
    9. Matz Dahlberg & Eva Johansson, 2000. "An examination of the dynamic behaviour of local governments using GMM bootstrapping methods," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(4), pages 401-416.
    10. repec:kap:iaecre:v:15:y:2009:i:2:p:143-155 is not listed on IDEAS
    11. Antti Moisio, 2001. "On Local Government Spending and Taxation Behaviour - effect of population size and economic condition," Discussion Papers 257, Government Institute for Economic Research Finland (VATT).
    12. Shanna Rose, 2006. "Do fiscal rules dampen the political business cycle?," Public Choice, Springer, vol. 128(3), pages 407-431, September.
    13. Matz Dahlberg & Eva Johansson, 1998. "The revenues-expenditures nexus: panel data evidence from Swedish municipalities," Applied Economics, Taylor & Francis Journals, vol. 30(10), pages 1379-1386.
    14. Luis Gil-Alana, 2009. "Government Expenditures and Revenues: Evidence of Fractional Cointegration in an Asymmetric Modeling," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 15(2), pages 143-155, May.
    15. Matthieu Leprince & Sonia Paty & Emmanuelle Reulier, 2005. "Choix d'imposition et interactions spatiales entre collectivités locales. Un test sur les départements français," Recherches économiques de Louvain, De Boeck Université, vol. 71(1), pages 67-93.
    16. Guy Navon, 2006. "Budgetary dynamics in the local authorities in Israel," Israel Economic Review, Bank of Israel, vol. 4(2), pages 19-52.
    17. Propheter Geoffrey, 2015. "Political Institutions and State Sales Tax Base Erosion," Statistics, Politics and Policy, De Gruyter, vol. 6(1-2), pages 1-17, December.
    18. Daniel E. Ingberman & Robert P. Inman, 1987. "The Political Economy of Fiscal Policy," NBER Working Papers 2405, National Bureau of Economic Research, Inc.
    19. Nadeem Iqbal & Wasim Shahid Malik, 2010. "Budget Balance: Through Revenue or Spending Adjustment: Evidence from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 611-630.
    20. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291401, HAL.
    21. Bayer, Ralph-C. & Oberhofer, Harald & Winner, Hannes, 2015. "The occurrence of tax amnesties: Theory and evidence," Journal of Public Economics, Elsevier, vol. 125(C), pages 70-82.

    More about this item

    Keywords

    state finances; Taxation;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedgif:500. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ryan Wolfslayer ; Keisha Fournillier (email available below). General contact details of provider: https://edirc.repec.org/data/frbgvus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.