Mark, Skidmore and Chad, Cotti and James, Alm (2011): The Political Economy of State Government Subsidy Adoption: The Case of Ethanol.
Download (335kB) | Preview
In this paper we examine the factors that determine the adoption of state economic development incentives in the ethanol industry. We compile data on the implementation dates for subsidies/tax credits for all states for years 1984-2007, a period that covers the complete emergence of the biofuel industry in the United States and that was characterized by the passage of a numerous of state-level subsidies and tax breaks aimed at increasing ethanol production. Using Cox proportional hazard regression analysis, we find that states are more likely to adopt ethanol subsidies when corn production is high, when corn prices are low and gasoline prices are high, when a state is affiliated with the National Corn Growers Association, when a check-off is present, and when state government is under the control of Democrats.
|Item Type:||MPRA Paper|
|Original Title:||The Political Economy of State Government Subsidy Adoption: The Case of Ethanol|
|Keywords:||ethanol, subsidies, political economy, rent seeking, proportional hazard estimation|
|Subjects:||H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies
H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H71 - State and Local Taxation, Subsidies, and Revenue
|Depositing User:||Mark Skidmore|
|Date Deposited:||07. Oct 2011 16:55|
|Last Modified:||12. Feb 2013 14:29|
Alm, James, Michael McKee, and Mark Skidmore. 1993. Fiscal stress, tax competition, and the introduction of state lotteries. National Tax Journal 46 (4): 463-76.
Alm, James, and Mark Skidmore. 1999. Why do tax and expenditure limitations pass in state elections? Public Finance Review 27 (5): 481-510.
Becker, Gary S. 1983. A theory of competition among pressure groups for political influence. The Quarterly Journal of Economics 98 (3): 371-400.
Bergstrom, Theodore C., and Robert P. Goodman. 1973. Private demands for public goods. The American Economic Review 63 (3): 280-296.
Besley, Timothy, and Anne Case. 1995. Incumbent behavior, vote-seeking, tax setting, and yardstick competition. The American Economic Review 85 (1): 25-45.
Besley, Timothy, and Anne Case. 2000. Unnatural experiments? Estimating the incidence of endogenous policies. Economic Journal 110 (467): F672-694. Black, Duncan. 1948. On the rationale of group decision making. The Journal of Political Economy 56 (1): 133-146.
Borcherding, Thomas E., and Robert T. Deacon. 1972. The demand for the services of non-federal governments. The American Economic Review 64 (5): 891-901.
Bowen, Howard R. 1943. The interpretation of voting in the allocation of economic resources. The Quarterly Journal of Economics 58 (1): 27-48.
Chi, K. 1994. State business incentives: Options for the future. In State Trends and Forecasts, Lexington, KY: Council of State Governments.
Cotti, Chad, and Mark Skidmore. 2010. The impact of state government subsidies and tax credits in an emerging industry: Ethanol production 1980–2007. Southern Economic Journal 76 (4): 1076–1093.
De Gorter, Harry, and Johan Swinnen. 2002. Political economy of agricultural policy. In Handbook of Agricultural Economics, Volume 2, Bruce L. Gardner and
Gordon C. Rausser, eds., 1893-1943. Amsterdam, The Netherlands: Elsevier B. V. – North Holland Publishers.
Dubin, Jeffrey A., Michael Graetz, and Louis L. Wilde. 1992. State income tax amnesties: Causes. The Quarterly Journal of Economics 107 (3): 1057-1070.
Gardner, Bruce. 2007. Fuel ethanol subsidies and farm price support. Journal of Agricultural & Food Industrial Organization 5 (2): Article 4.
Greenberg, Elizabeth, and Richard Reeder. 1998. Who benefits from business assistance programs? Results of the ERS rural manufacturing survey. Agriculture Information Bulletin No. 736-04. Washington, DC: Economic Research Services, U.S. Department of Agriculture.
Grossman, Gene M., and Elhanan Helpman. 1994. Protection for sale. The American Economic Review 84 (4): 833-850. Hahn, Robert, and Caroline Cecot. 2007. The benefits and costs of ethanol. Journal of Regulatory Economics 35 (3): 275–95.
Hettich, Walter, and Stanley L. Winer. 1988. Economic and political foundations of tax structure. The American Economic Review 78 (3): 701-712.
Jones, Bradford, and Regina Branton. 2005. Beyond logit and probit: Cox duration models of single, repeating, and competing events for state policy adoption. State Politics & Policy Quarterly 5: 420
Mueller, Dennis C. 2003. Public Choice III. New York, NY: Cambridge University Press.
Peltzman, Sam. 1976. Toward a more general theory of regulation. Journal of Law and Economics 19 (2): 211-240. Persson, Torsten, and Guido Tabellini. 2002. Political economics and public finance. In Handbook of Public Economics, Volume 3, Alan J. Auerbach and Martin Feldstein, eds., 1549-1659. Amsterdam, The Netherlands: Elsevier B. V. – North Holland Publishers.
Poterba, James M. 1994. State responses to fiscal crises: The effects of budgetary institutions. The Journal of Political Economy 104 (4): 799-821.
Poterba, James M. 1995. Balanced budget rules and fiscal policy: Evidence from the states. National Tax Journal 48 (3): 329-337.
Renewable Fuels Association. 2007. “Annual Industry Outlook (2002–2008)”, available at http://www.ethanolrfa.org/industry/outlook/.
Rueben, Kim S. 1996. Tax limitations and government growth: The effect of state tax and expenditure limits on state and local government. Public Policy Institute of California. Berkeley, CA.
United States Agency for International Development. 2009. “USAID responds to global food crisis”, available at http://www.usaid.gov/our_work/humanitarian_assistance/foodcrisis/.
United States Department of Agriculture. 2007. “National Agriculture Statistical Service”, available at http://www.nass.usda.gov/QuickStats/index2.jsp. U.S. Department of Energy. 2007. ‘‘Alternative Fuels Data Center”, available at http://www.eere.energy.gove/afde/progs/ind_fed_incentives.cgi.