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Political Parties and the Tax Level in the American states: Two Regression Discontinuity Designs

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  • Leandro M. de Magalhães
  • Lucas Ferrero

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    Abstract

    Do parties matter? Yes, but not in the usual way we tend to think of them: big government Democrats and small government Republicans. Our first regression discontinuity design shows that whether the majority in the House of Representatives is Republican or Democratic does not affect the tax level. This surprising result goes against the recent literature in political economy. We then perform another regression discontinuity design in which we find that whether a government is aligned (both the Governor and the majority in the state House belong to the same party) or divided (they belong to different parties) does have an effect on the tax level. Taxes are higher when the government is aligned.

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    File URL: http://www.efm.bris.ac.uk/economics/working_papers/pdffiles/dp10614.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 10/614.

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    Length: 47 pages
    Date of creation: Sep 2010
    Date of revision:
    Handle: RePEc:bri:uobdis:10/614

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    Keywords: Regression discontinuity design; Democrats; Republicans; divided government; line item veto; tax level.;

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    1. Solé-Ollé, Albert & Sorribas-Navarro, Pilar, 2008. "The effects of partisan alignment on the allocation of intergovernmental transfers. Differences-in-differences estimates for Spain," Journal of Public Economics, Elsevier, Elsevier, vol. 92(12), pages 2302-2319, December.
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