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Legislative Term Limits and State Aid to Local Governments

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Author Info

  • Yakovlev, Pavel

    ()
    (Duquesne University)

  • Tosun, Mehmet S.

    ()
    (University of Nevada, Reno)

  • Lewis, William P.

    (Duquesne University)

Abstract

We 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 Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6456.

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Length: 30 pages
Date of creation: Mar 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6456

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Related research

Keywords: term limits; pork-barrel spending; rent-seeking; transportation; welfare; education; health; intergovernmental aid and transfers;

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  1. Joseph M. Johnson & W. Mark Crain, 2004. "Effects of Term Limits on Fiscal Performance: Evidence from Democratic Nations," Public Choice, Springer, vol. 119(1_2), pages 73-90, 04.
  2. Daron Acemoglu & Georgy Egorov & Konstantin Sonin, 2013. "A Political Theory of Populism," Levine's Working Paper Archive 786969000000000654, David K. Levine.
  3. Douglas Holtz-Eakin & Harvey S. Rosen, 1989. "Intertemporal analysis of state and local government spending: theory and tests," Working Papers 89-4, Federal Reserve Bank of Philadelphia.
  4. Claudio Ferraz & Frederico Finan, 2009. "Electoral Accountability and Corruption: Evidence from the Audits of Local Governments," NBER Working Papers 14937, National Bureau of Economic Research, Inc.
  5. Michael Smart & Daniel M. Sturm, 2006. "Term Limits and Electoral Accountability," CEP Discussion Papers dp0770, Centre for Economic Performance, LSE.
  6. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
  7. Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles 3451400, Harvard University Department of Economics.
  8. Pavel A. Yakovlev, 2011. "In uncertainty we trust: a median voter model with risk aversion," Financial Theory and Practice, Institute of Public Finance, vol. 35(4), pages 465-477.
  9. Lopez, Edward J, 2003. " Term Limits: Causes and Consequences," Public Choice, Springer, vol. 114(1-2), pages 1-56, January.
  10. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  11. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  12. Skidmore, Mark, 1999. " Tax and Expenditure Limitations and the Fiscal Relationships between State and Local Governments," Public Choice, Springer, vol. 99(1-2), pages 77-102, April.
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