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Divided Government, Fiscal Institutions, and Budget Deficits: Evidence from the States

Published online by Cambridge University Press:  02 September 2013

James E. Alt  and
Robert C. Lowry
James E. Alt
Affiliation:
Harvard University
Robert C. Lowry
Affiliation:
Michigan State University
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Abstract

Does partisan control of American state government have systematic effects on state spending and taxing levels? Does divided control affect the government's ability to make hard decisions? Do institutional rules like legal deficit carryover restrictions matter? Using a formal model of fiscal policy to guide empirical analysis of data covering the American states from 1968 to 1987, we conclude that (1) aggregate state budget totals are driven by different factors under Democrats and Republicans, the net result being that Democrats target spending (and taxes) to higher shares of state-level personal income; (2) divided government is less able to react to revenue shocks that lead to budget deficits, particularly where different parties control each chamber of the legislature; and (3) unified party governments with restricted ability to carry deficits into the next fiscal year (outside the South) have sharper reactions to negative revenue shocks than those without restrictions.

Type
Articles
Information
American Political Science Review , Volume 88 , Issue 4 , December 1994 , pp. 811 - 828
Copyright
Copyright © American Political Science Association 1994

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