Pick Your Poison: Do Politicians Regulate When They Can’t Spend?

Johnson, Noel D and Matthew, Mitchell and Yamarik, Steven (2012): Pick Your Poison: Do Politicians Regulate When They Can’t Spend?

Abstract

We investigate whether laws restricting fiscal policies across U.S. states lead politicians to adopt more partisan regulatory policy instead. We first show that partisan policy outcomes do exist across U.S. states, with Republicans cutting taxes and spending and Democrats raising them. We then demonstrate that these partisan policy outcomes are moderated in states with no-carry restrictions on public deficits. Lastly, we test whether unified Republican or Democratic state governments regulate more when constrained by no-carry restrictions. We find no-carry laws restrict partisan fiscal outcomes but tend to lead to more partisan regulatory outcomes.

• Item Type: MPRA Paper
• Language: English
• Keywords: Regulation, Taxation, Local Public Finance, U.S. States, Balanced Budget Rules
• Subjects: L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government; D - Microeconomics > D0 - General > D02 - Institutions: Design, Formation, Operations, and Impact

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