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Legislative Organization of Fiscal Policy

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  • Crain, W Mark
  • Muris, Timothy J

Abstract

In the voluminous literature on fiscal policy, there is little evidence about the impact of legislative organization on shaping fiscal decisions. By comparing different organizations of committee structure to control tax and spending policies, this article presents such evidence. Regarding spending, we test whether the dispersion of spending authority among multiple committees creates a problem similar to that of the "common pool." Using American state data, we find that when only one committee has the authority to spend, spending is restrained relative to when spending authority is balkanized. Regarding spending, we hypothesize that if a single committee controls not only all spending authority but also all taxation authority, that committee will have more incentive to tax than a committee that does not control spending; it can obtain the benefits of increased taxation more directly. Again, this proposition is supported by evidence at the state level. Copyright 1995 by the University of Chicago.

Suggested Citation

  • Crain, W Mark & Muris, Timothy J, 1995. "Legislative Organization of Fiscal Policy," Journal of Law and Economics, University of Chicago Press, vol. 38(2), pages 311-333, October.
  • Handle: RePEc:ucp:jlawec:v:38:y:1995:i:2:p:311-33
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    File URL: http://dx.doi.org/10.1086/467334
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    References listed on IDEAS

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    1. Peltzman, Sam, 1976. "Toward a More General Theory of Regulation," Journal of Law and Economics, University of Chicago Press, vol. 19(2), pages 211-240, August.
    2. Kalt, Joseph P & Zupan, Mark A, 1990. "The Apparent Ideological Behavior of Legislators: Testing for Principal-Agent Slack in Political Institutions," Journal of Law and Economics, University of Chicago Press, vol. 33(1), pages 103-131, April.
    3. Inman, Robert P & Fitts, Michael A, 1990. "Political Institutions and Fiscal Policy: Evidence from the U.S. Historical Record," Journal of Law, Economics, and Organization, Oxford University Press, vol. 6(0), pages 79-132.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Institutions matter, state legislative committee edition
      by Matt Mitchell in Neighborhood Effects on 2015-05-27 22:02:18

    Citations

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    Cited by:

    1. Timothy Besley & Anne Case, 2003. "Political Institutions and Policy Choices: Evidence from the United States," Journal of Economic Literature, American Economic Association, pages 7-73.
    2. Gilligan, Thomas W. & Matsusaka, John G., 2001. "Fiscal Policy, Legislature Size, and Political Parties: Evidence From State and Local Governments in the First Half of the 20th Century," National Tax Journal, National Tax Association, vol. 54(1), pages 57-82, March.
    3. Wehner, Joachim, 2006. "Legislative institutions and fiscal policy," LSE Research Online Documents on Economics 25509, London School of Economics and Political Science, LSE Library.
    4. Gilligan, Thomas W. & Matsusaka, John G., 2001. "Fiscal Policy, Legislature Size, and Political Parties: Evidence from State and Local Governments in the First Half of the 20th Century," National Tax Journal, National Tax Association, vol. 54(n. 1), pages 57-82, March.
    5. Anwar Hussain & David Laband, 2005. "The tragedy of the political commons: Evidence from U.S. Senate roll call votes on environmental legislation," Public Choice, Springer, vol. 124(3), pages 353-364, September.
    6. Crain, W. Mark & Crain, Nicole Verrier, 1998. "Fiscal consequences of budget baselines," Journal of Public Economics, Elsevier, vol. 67(3), pages 421-436, March.
    7. Lucas Ferrero & Leandro M. de Magalhães, 2005. "Separation of Powers, Line Item Veto and the Tax Level: Evidence from the American States Draft 1," Working Papers 0031, Universidade Federal do Paraná, Department of Economics.
    8. Mazza, Isidoro & van Winden, Frans, 2008. "An endogenous policy model of hierarchical government," European Economic Review, Elsevier, vol. 52(1), pages 133-149, January.
    9. Matsusaka, John G, 2000. "Fiscal Effects of the Voter Initiative in the First Half of the Twentieth Century," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 619-650, October.
    10. Robert Elgie & Iain McMenamin, 2008. "Political fragmentation, fiscal deficits and political institutionalisation," Public Choice, Springer, vol. 136(3), pages 255-267, September.
    11. Chang, Andrew C., 2014. "Tax Policy Endogeneity: Evidence from R&D Tax Credits," Finance and Economics Discussion Series 2014-101, Board of Governors of the Federal Reserve System (U.S.).
    12. Bradbury, John Charles & Crain, W. Mark, 2001. "Legislative organization and government spending: cross-country evidence," Journal of Public Economics, Elsevier, vol. 82(3), pages 309-325, December.
    13. Daniel Mitchell, 2005. "Charles K. Rowley, William F. Shughart II, and Robert D. Tollison (Eds.), The economics of budget deficits. The International Library of Critical Writings in Economics 153, ed. by Mark Blaug. Cheltenh," Public Choice, Springer, vol. 122(3), pages 501-512, March.
    14. Richard E. Wagner, 2012. "Deficits, Debt, and Democracy," Books, Edward Elgar Publishing, number 14477, April.
    15. Crain, W Mark, 1999. "Districts, Diversity, and Fiscal Biases: Evidence from the American States," Journal of Law and Economics, University of Chicago Press, vol. 42(2), pages 675-698, October.

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