IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Separation of Powers, Line Item Veto and the Tax Level: Evidence from the American States Draft 1

  • Lucas Ferrero
  • Leandro M. de Magalhães


Line item veto, a feature present in most American States, gives the governor the power to veto single appropriation items from the budget. Its effects on the tax level, however, are still controversial in the empirical and theoretical literature (cf. Holtz-Eakins (1988) and Besley and Case (2003)). Line item veto is mostly a time invariant feature and to asses its effects previous studies have interacted it with political control variables such as a divided government. The endogenity problems that arise from using a political variable to explain a policy variable, however, have not been dealt with in these studies. We use three empirical approaches to tackle the problem and show that line item veto does have a significant negative effect on the tax rate in the States: diffs-in-diffs estimation with instrumental variables (election results in lower offices at the state level), regression discontinuity design, and a dynamic panel. Our prior on its effects comes from adapting the separation of powers model by Persson, Roland and Tabellini (2000) to the American States setup: we add line item veto and an executive. Our model delivers a clear prediction on the tax level, on the amount of public good, and on the importance of group specific transfers.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Universidade Federal do Paraná, Department of Economics in its series Working Papers with number 0031.

in new window

Length: 33 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:fup:wpaper:0031
Note: Creation Date corresponds to the year in which the paper was published on the Department of Economics website. The paper may have been written a small number of months before its publication date.
Contact details of provider: Postal: Av. Prefeito Lothário Meissner, 632 - térreo, Bairro Jardim Botânico, 80210-170 Curitiba - PR
Phone: (041)360-4350
Fax: (041)360-4471
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Timothy Besley & Torsten Persson & Daniel.M Sturm, 2005. "Political competition and economic performance: theory and evidence from the United States," LSE Research Online Documents on Economics 3770, London School of Economics and Political Science, LSE Library.
  2. Torsten Persson & Gerard Roland & Guido Tabellini, . "Comparative Politics and Public Finance," Working Papers 114, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  3. Timothy Besley & Anne Case, 2003. "Political Institutions and Policy Choices: Evidence from the United States," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 7-73, March.
  4. Besley, Timothy & Case, Anne, 2000. "Unnatural Experiments? Estimating the Incidence of Endogenous Policies," Economic Journal, Royal Economic Society, vol. 110(467), pages F672-94, November.
  5. Henning Bohn & Robert P. Inman, 1996. "Balanced Budget Rules and Public Deficits: Evidence from the U.S. States," NBER Working Papers 5533, National Bureau of Economic Research, Inc.
  6. 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 311-33, October.
  7. Knight, Brian G., 2000. "Supermajority voting requirements for tax increases: evidence from the states," Journal of Public Economics, Elsevier, vol. 76(1), pages 41-67, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fup:wpaper:0031. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Luciano Nakabashi)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.