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Term Length and Public Finances: The Case of U.S. Governors

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  • Klarin, Jonas

    (Department of Economics)

Abstract

This paper studies how a politician’s term length affects public finances. I test whether the gradual increase fromtwo- to four-year terms for American governors affects state finances using a rich state-year panel stretching back almost a century. The results show that adopting four-year terms decreases annual expendituresand revenues by 6 %. The effect of the reform is present immediately after voters approve the ballot measure, when the last two-year-term governor is still in office, which suggests that the mechanism at work is stronger re-election incentives for the incumbent. The effect is larger among electorally ’at risk’ governors. Democratic governors respond to longer terms by increasing public employment instead of decreasing expenditures.

Suggested Citation

  • Klarin, Jonas, 2019. "Term Length and Public Finances: The Case of U.S. Governors," Working Paper Series 2019:5, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:2019_005
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    References listed on IDEAS

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    Cited by:

    1. Luca Repetto & Maximiliano Sosa Andrés, 2022. "Divided Government and Polarization: Regression-Discontinuity Evidence from US States," CESifo Working Paper Series 9823, CESifo.
    2. Repetto, Luca & Andrés, Maximiliano Sosa, 2023. "Divided government, polarization, and policy: Regression-discontinuity evidence from US states," European Journal of Political Economy, Elsevier, vol. 80(C).

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    Keywords

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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