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Why Do Small States Receive More Federal Money? US Senate Representation and the Allocation of Federal Budget

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  • Leonzio Rizzo

    ()

  • Valentino Larcinese
  • Cecilia Testa

Abstract

Empirical research on the geographic distribution of US federal spending shows that small states receive disproportionately more dollars per capita. This evidence, often regarded as the consequence of Senate malapportionment, in reality con‡ates the effects of state population size with that of state population growth. Analysing outlyas for the period 1978-2002, this paper shows that properly controlling for population dynamics provides more reasonable estimates of small-state advantage and solves a number of puzzling peculiarities of previous research. We also show that states with fast growing population loose federal spending to the advantage of slow growing ones independently of whether they are large or small. The two population effects vary substantially across spending programs. Small states enjoy some advantage in defense spending, whereas fast growing ones are penalized in the allocation of federal grants, particularly those administered by formulas limiting budgetary adjustments. Hence, a large part of the inverse relationship between spending and population appears to be driven by mechanisms of budgetary inertia, which are compatible with incrementalist theories of budget allocation.

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Bibliographic Info

Paper provided by University of Ferrara, Department of Economics in its series Working Papers with number 201215.

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Length: 36 pages
Date of creation: 30 Sep 2012
Date of revision:
Handle: RePEc:udf:wpaper:201215

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Keywords: federal budget; malapportionment; small state advantage; overrepresentation; population dynamics;

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  1. Wallis, John, 2001. "The Political Economy of New Deal Spending, Yet Again: A Reply to Fleck," Explorations in Economic History, Elsevier, Elsevier, vol. 38(2), pages 305-314, April.
  2. Brian Knight, 2008. "Legislative Representation, Bargaining Power and The Distribution of Federal Funds: Evidence From The Us Congress," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 118(532), pages 1785-1803, October.
  3. Brian Knight, 2004. "Legislative Representation, Bargaining Power, and the Distribution of Federal Funds: Evidence from the U.S. Senate," NBER Working Papers, National Bureau of Economic Research, Inc 10385, National Bureau of Economic Research, Inc.
  4. Hauk, William R. & Wacziarg, Romain, 2007. "Small States, Big Pork," International Quarterly Journal of Political Science, now publishers, now publishers, vol. 2(1), pages 95-106, March.
  5. Tiberiu Dragu & Jonathan Rodden, 2010. "Representation and regional redistribution in federations," Working Papers, Institut d'Economia de Barcelona (IEB) 2010/16, Institut d'Economia de Barcelona (IEB).
  6. Wallis, John Joseph, 1998. "The Political Economy of New Deal Spending Revisited, Again: With and without Nevada," Explorations in Economic History, Elsevier, Elsevier, vol. 35(2), pages 140-170, April.
  7. Atlas, Cary M, et al, 1995. "Slicing the Federal Government Net Spending Pie: Who Wins, Who Loses, and Why," American Economic Review, American Economic Association, American Economic Association, vol. 85(3), pages 624-29, June.
  8. Gary Hoover & Paul Pecorino, 2005. "The Political Determinants of Federal Expenditure at the State Level," Public Choice, Springer, Springer, vol. 123(1), pages 95-113, April.
  9. Fleck, Robert K., 2001. "Population, Land, Economic Conditions, and the Allocation of New Deal Spending," Explorations in Economic History, Elsevier, Elsevier, vol. 38(2), pages 296-304, April.
  10. Valentino Larcinese & Leonzio Rizzo & Cecilia Testa, 2005. "Allocating the US Federal Budget to the States: the Impact of the President," STICERD - Political Economy and Public Policy Paper Series, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE 03, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  11. Brian Knight, 2005. "Estimating the Value of Proposal Power," American Economic Review, American Economic Association, American Economic Association, vol. 95(5), pages 1639-1652, December.
  12. Alesina, Alberto & Wacziarg, Romain, 1998. "Openness, country size and government," Journal of Public Economics, Elsevier, Elsevier, vol. 69(3), pages 305-321, September.
  13. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, Elsevier, vol. 65(1), pages 9-15, October.
  14. Wright, Gavin, 1974. "The Political Economy of New Deal Spending: An Econometric Analysis," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 56(1), pages 30-38, February.
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Cited by:
  1. Stratford Douglas & W. Robert Reed, 2014. "A Replication of "The Political Determinants of Federal Expenditure at the State Level" (Public Choice, 2005)," Working Papers, Department of Economics, West Virginia University 14-03, Department of Economics, West Virginia University.
  2. Niklas Potrafke & Markus Reischmann, 2014. "Fiscal Transfers and Fiscal Sustainability," CESifo Working Paper Series, CESifo Group Munich 4716, CESifo Group Munich.
  3. Niklas Potrafke & Markus Reischmann, 2014. "Fiskalische Nachhaltigkeit und Transferzahlungen," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 67(07), pages 17-22, 04.

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