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Do Businessmen Make Good Governors?

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  • Florian Neumeier

    (University of Marburg)

Abstract

This paper empirically evaluates the economic performance of U.S. state governors who came to the position from a business background (CEO governors), focusing on the growth rate of real personal income per capita, unemployment rate, and income inequality. Methodologically, we apply a matching method to account for the endogeneity of political selection. Using entropy balancing, we identify credible counterfactuals for CEO governors, that is, governors without a business background who took office under similar economic and fiscal situations. We find, first, that businesspeople tend to take office in times of economic and fiscal strain. Second, the tenures of CEO governors are associated with a 0.6 percentage points higher annual income growth rate and a 0.6 percentage points lower unemployment rate than are the tenures of non-CEO governors. Also, state-level income inequality decreases when CEO governors hold office, indicating that low-income households benefit from the economic upswing. Third, the positive effect of having a CEO governor increases with time in office. Fourth, Republican CEO governors perform slightly better than their Democratic colleagues.

Suggested Citation

  • Florian Neumeier, 2015. "Do Businessmen Make Good Governors?," MAGKS Papers on Economics 201519, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201519
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    10. Adam Pilny & Felix Roesel, 2020. "Are Doctors Better Health Ministers?," American Journal of Health Economics, University of Chicago Press, vol. 6(4), pages 498-532.
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    12. Niklas Potrafke, 2017. "Government Ideology and Economic Policy-Making in the United States," CESifo Working Paper Series 6444, CESifo.
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    More about this item

    Keywords

    U.S. Governors; U.S. politics; U.S. states; economic growth; unemployment; income inequality; businessmen; CEO; entropy balancing;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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