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Federal tax policies, congressional voting and natural resources

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  • Fidel Perez-Sebastian
  • Ohad Raveh

Abstract

Can abundance of natural resources affect legislators' voting behaviour over federal tax policies? We construct a political economy model of a federalized economy with district heterogeneity in natural resource abundance. The model shows that representatives of natural resource-rich districts are more (less) willing to vote in favour of federal tax increases (decreases). This occurs because resource-rich districts are less responsive to federal tax changes due to the immobile nature of their natural resources. We test the model's predictions using data on roll-call votes in the US House of Representatives over the major federal tax bills initiated during the period of 19452003, in conjunction with the presence of active giant oil fields in US congressional districts. Our identification strategy rests on plausibly exogenous giant oil field discoveries and exploitation and narrative-based aggregate federal tax shocks that are exogenous to individual congressional districts and legislators. We find that: (i) resource-rich congressional districts are less responsive to changes in federal taxes and (ii) representatives of resource-rich congressional districts are more (less) supportive of federal tax increases (decreases), controlling for legislator, congressional district and state indicators. Our results indicate that resource richness is approximately half as dominant as the main determinant, namely party affiliation, in driving legislators' voting behaviour over federal tax policies.

Suggested Citation

  • Fidel Perez-Sebastian & Ohad Raveh, 2019. "Federal tax policies, congressional voting and natural resources," Canadian Journal of Economics, Canadian Economics Association, vol. 52(3), pages 1112-1164, August.
    • Handle: RePEc:cje:issued:v:52:y:2019:i:3:p:1112-1164
    DOI: 10.1111/caje.12404
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    Cited by:

    1. Ikan, Lotem & Lagziel, David & Raveh, Ohad, 2025. "Resource windfalls, connectivity, and political polarization," Journal of Environmental Economics and Management, Elsevier, vol. 132(C).
    2. Rick Van der Ploeg & Fidel Perez-Sebastian & Ohad Raveh, 2019. "Oil Discoveries and Protectionism," Economics Series Working Papers 895, University of Oxford, Department of Economics.
    3. Raveh, Ohad & Zhang, Yan, 2022. "The Long-Term Health Effects of Oil Discoveries: Evidence from China," MPRA Paper 114059, University Library of Munich, Germany.
    4. Perez-Sebastian, Fidel & Raveh, Ohad & van der Ploeg, Frederick, 2021. "Oil discoveries and protectionism: Role of news effects," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).
    5. Fidel Perez-Sebastian & Ohad Raveh & Frederick van der Ploeg, 2025. "Natural Resources, Technology Improvements, and Growth," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(8), pages 2157-2199, August.
    6. Ohad Raveh, 2025. "Can Oil Windfalls Decrease Fiscal Accountability? Evidence From No‐Term‐Limit Regimes," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 69(4), pages 744-765, October.

    More about this item

    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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