Legislative Term Limits and State Aid to Local Governments
AbstractWe estimate the effect of legislative term limits on various categories of state government spending using the most recent panel of 47 states from 1972 to 2005. Besides the usual economic, political, fiscal and demographic factors, we also control for the state tax and expenditure limitations. We find that term limits have a significant positive effect on total state government spending, but no significant positive effect on state education, health, transportation or welfare expenditures. This dichotomy in the estimates raises a very important and previously overlooked question: what budget category is responsible for higher state spending in term-limited states? Our analysis reveals that legislative term limits increase pork-barrel spending, which takes the form of higher transfers from state to local governments. This finding might also imply that legislative term limits lead to more fiscal decentralization.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6456.
Length: 30 pages
Date of creation: Mar 2012
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- H7 - Public Economics - - State and Local Government; Intergovernmental Relations
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
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