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Political Parties and the Tax Level in the American states: Two Regression Discontinuity Designs

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  • Leandro M. De Magalhães
  • Lucas Ferrero

    ()

Abstract

Do parties matter? Yes, but not in the usual way we tend to think of them: big government Democrats and small government Republicans. Our first regression discontinuity design shows that whether the majority in the House of Representatives is Republican or Democratic does not affect the tax level. This surprising result goes against the recent literature in political economy. We then perform another regression discontinuity design in which we find that whether a government is aligned (both the Governor and the majority in the state House belong to the same party) or divided (they belong to different parties) does have an effect on the tax level. Taxes are higher when the government is aligned.

Suggested Citation

  • Leandro M. De Magalhães & Lucas Ferrero, 2010. "Political Parties and the Tax Level in the American states: Two Regression Discontinuity Designs," Bristol Economics Discussion Papers 10/614, Department of Economics, University of Bristol, UK.
  • Handle: RePEc:bri:uobdis:10/614
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    File URL: http://www.efm.bris.ac.uk/economics/working_papers/pdffiles/dp10614.pdf
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    References listed on IDEAS

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    1. Solé-Ollé, Albert & Sorribas-Navarro, Pilar, 2008. "The effects of partisan alignment on the allocation of intergovernmental transfers. Differences-in-differences estimates for Spain," Journal of Public Economics, Elsevier, vol. 92(12), pages 2302-2319, December.
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    More about this item

    Keywords

    Regression discontinuity design; Democrats; Republicans; divided government; line item veto; tax level.;

    JEL classification:

    • H00 - Public Economics - - General - - - General
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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