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Why Do Small States Receive More Federal Money? US Senate Representation and the Allocation of Federal Budget

  • Leonzio Rizzo


  • Valentino Larcinese
  • Cecilia Testa

Empirical research on the geographic distribution of US federal spending shows that small states receive disproportionately more dollars per capita. This evidence, often regarded as the consequence of Senate malapportionment, in reality con‡ates the effects of state population size with that of state population growth. Analysing outlyas for the period 1978-2002, this paper shows that properly controlling for population dynamics provides more reasonable estimates of small-state advantage and solves a number of puzzling peculiarities of previous research. We also show that states with fast growing population loose federal spending to the advantage of slow growing ones independently of whether they are large or small. The two population effects vary substantially across spending programs. Small states enjoy some advantage in defense spending, whereas fast growing ones are penalized in the allocation of federal grants, particularly those administered by formulas limiting budgetary adjustments. Hence, a large part of the inverse relationship between spending and population appears to be driven by mechanisms of budgetary inertia, which are compatible with incrementalist theories of budget allocation.

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Paper provided by University of Ferrara, Department of Economics in its series Working Papers with number 201215.

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Length: 36 pages
Date of creation: 30 Sep 2012
Date of revision:
Handle: RePEc:udf:wpaper:201215
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  1. Fleck, Robert K., 2001. "Population, Land, Economic Conditions, and the Allocation of New Deal Spending," Explorations in Economic History, Elsevier, vol. 38(2), pages 296-304, April.
  2. Wright, Gavin, 1974. "The Political Economy of New Deal Spending: An Econometric Analysis," The Review of Economics and Statistics, MIT Press, vol. 56(1), pages 30-38, February.
  3. Valentino Larcinese & Leonzio Rizzo & Cecilia Testa, 2005. "Allocating the US federal budget to the states: the impact of the President," LSE Research Online Documents on Economics 3611, London School of Economics and Political Science, LSE Library.
  4. Tiberiu Dragu & Jonathan Rodden, 2010. "Representation and regional redistribution in federations," Working Papers 2010/16, Institut d'Economia de Barcelona (IEB).
  5. Brian Knight, 2005. "Estimating the Value of Proposal Power," American Economic Review, American Economic Association, vol. 95(5), pages 1639-1652, December.
  6. Wacziarg, Romain & Alesina, Alberto, 1998. "Openness, Country Size and Government," Scholarly Articles 4553014, Harvard University Department of Economics.
  7. Gary Hoover & Paul Pecorino, 2005. "The Political Determinants of Federal Expenditure at the State Level," Public Choice, Springer, vol. 123(1), pages 95-113, April.
  8. Wallis, John, 2001. "The Political Economy of New Deal Spending, Yet Again: A Reply to Fleck," Explorations in Economic History, Elsevier, vol. 38(2), pages 305-314, April.
  9. Wallis, John Joseph, 1998. "The Political Economy of New Deal Spending Revisited, Again: With and without Nevada," Explorations in Economic History, Elsevier, vol. 35(2), pages 140-170, April.
  10. Brian Knight, 2004. "Legislative Representation, Bargaining Power, and the Distribution of Federal Funds: Evidence from the U.S. Senate," NBER Working Papers 10385, National Bureau of Economic Research, Inc.
  11. Hauk, William R. & Wacziarg, Romain, 2007. "Small States, Big Pork," Quarterly Journal of Political Science, now publishers, vol. 2(1), pages 95-106, March.
  12. Atlas, Cary M, et al, 1995. "Slicing the Federal Government Net Spending Pie: Who Wins, Who Loses, and Why," American Economic Review, American Economic Association, vol. 85(3), pages 624-29, June.
  13. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
  14. Brian Knight, 2008. "Legislative Representation, Bargaining Power and The Distribution of Federal Funds: Evidence From The Us Congress," Economic Journal, Royal Economic Society, vol. 118(532), pages 1785-1803, October.
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