Interstate tax competition after TRA86
When a governor announces that a tax increase is necessary, how do voters decide whether the governor is representing the situation honestly, or just preparing to line his or her pockets? This paper presents evidence that voters may look at the tax increases in neighboring states to obtain information on whether a tax increase is appropriate and, using this information, decide whether to reelect their governor. The data suggest that comparisons with neighbors influence gubernatorial behavior: Governors are more likely to raise taxes when neighbors are doing the same. TRA86 allows us an extra check on the rnodelpresented: I f the marginal dollar taken in state taxes is more costly to state residents, this may increase the extent to which residents use information provided through neighboring states to sort good governors from bad.
Volume (Year): 12 (1993)
Issue (Month): 1 ()
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References listed on IDEAS
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- Alesina, Alberto & Spear, Stephen E., 1988.
"An overlapping generations model of electoral competition,"
Journal of Public Economics,
Elsevier, vol. 37(3), pages 359-379, December.
- Alberto Alesina & Stephen E. Spear, 1987. "An Overlapping Generations Model of Electoral Competition," NBER Working Papers 2354, National Bureau of Economic Research, Inc.
- Alesina, Alberto & Spear, Stephen, 1988. "An Overlapping Generations Model of Electoral Competition," Scholarly Articles 4553015, Harvard University Department of Economics.
- John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
- Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
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