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The power of the purse: what do the data say on US federal budget allocation to the states?"

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  • Cecilia Testa
  • Valentino Larcinse
  • Leonzio Rizzo

Abstract

This paper provides new evidence on the relevance of alternative theories of federal budget allocation to US States. Using a panel of 48 states over 20 years, we estimate the size and relative importance of different institutional and political factors in determining such allocation. We find that although socio-economic characteristics are very important explanatory variables of spending allocation, some states receive disproportionate amounts of money for reasons essentially linked to politics and the budget allocation process. In particular we find that the overrepresentation of small states determined by the Senate and Presidential election systems has an important impact on federal budget allocation. States whose governor has the same political affiliation of the President receive more federal funds in the form of procurement and defense spending. On the other hand, the political alignment between governor and majority in the House and/or Senate does not affect the allocation of federal funds. We do not find any evidence that marginal states receive more funding; on the opposite we find that safe states tend to be rewarded. Finally, the appropriation committee membership affects the distribution of broad spending categories like total expenditure per capita and direct payments to individuals, while senior members have a disproportionate impact on grant allocation

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File URL: http://repec.org/esLATM04/up.30778.1081955641.pdf
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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 Latin American Meetings with number 151.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:latm04:151

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Keywords: federal budget; pork-barrel; congress; committees; president;

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  1. Besley, Timothy & Case, Anne, 1995. "Does Electoral Accountability Affect Economic Policy Choices? Evidence from Gubernatorial Term Limits," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 769-98, August.
  2. Persson, Torsten & Roland, Gerard & Tabellini, Guido, 1997. "Separation of Powers and Political Accountability," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1163-1202, November.
  3. Alvarez, Michael R. & Saving, Jason, 1995. "Congressional Committees and the Political Economy of Federal Outlays," Working Papers 898, California Institute of Technology, Division of the Humanities and Social Sciences.
  4. Alesina, Alberto & Tabellini, Guido, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 403-14, July.
  5. Dahlberg, Matz & Johansson, Eva, 1999. "On the Vote Purchasing Behavior of Incumbent Governments," Working Paper Series 1999:24, Uppsala University, Department of Economics.
  6. Wright, Gavin, 1974. "The Political Economy of New Deal Spending: An Econometric Analysis," The Review of Economics and Statistics, MIT Press, vol. 56(1), pages 30-38, February.
  7. Torsten Persson & Guido Tabellini, 2004. "Constitutional Rules and Fiscal Policy Outcomes," American Economic Review, American Economic Association, vol. 94(1), pages 25-45, March.
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Cited by:
  1. Philippe Vedolim Duchateau & Basilia Aguirre, 2007. "Estrutura Política Como Determinante Dos Gastos Federais," Anais do XXXV Encontro Nacional de Economia [Proceedings of the 35th Brazilian Economics Meeting] 031, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  2. José Bercoff & Osvaldo Meloni, 2009. "Federal budget allocation in an emergent democracy: evidence from Argentina," Economics of Governance, Springer, vol. 10(1), pages 65-83, January.

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