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

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  • Leonzio Rizzo

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  • Valentino Larcinese
  • Cecilia Testa

Abstract

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.

Suggested Citation

  • Leonzio Rizzo & Valentino Larcinese & Cecilia Testa, 2012. "Why Do Small States Receive More Federal Money? US Senate Representation and the Allocation of Federal Budget," Working Papers 201215, University of Ferrara, Department of Economics.
  • Handle: RePEc:udf:wpaper:201215
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    1. repec:spr:ecogov:v:18:y:2017:i:4:d:10.1007_s10101-017-0196-6 is not listed on IDEAS
    2. Bev Wilson & Mallory L. Rahe, 2016. "Rural prosperity and federal expenditures, 2000–2010," Regional Science Policy & Practice, Wiley Blackwell, vol. 8(1-2), pages 3-26, March.
    3. Niklas Potrafke & Markus Reischmann, 2014. "Fiskalische Nachhaltigkeit und Transferzahlungen," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 67(07), pages 17-22, April.
    4. Stratford Douglas & W. Robert Reed, 2013. "A Replication of "The Political Determinants of Federal Expenditure at the State Level (Public Choice, 2005)," Working Papers in Economics 13/31, University of Canterbury, Department of Economics and Finance.
    5. Niklas Potrafke & Markus Reischmann, 2015. "Fiscal Transfers and Fiscal Sustainability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(5), pages 975-1005, August.
    6. Maaser, Nicola & Stratmann, Thomas, 2016. "Distributional consequences of political representation," European Economic Review, Elsevier, vol. 82(C), pages 187-211.

    More about this item

    Keywords

    federal budget; malapportionment; small state advantage; overrepresentation; population dynamics;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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