Does partisan control of American state government have systematic effects on state spending and taxing levels? Does divided control affect the government's ability to make hard decisions? Do institutional rules like legal deficit carryover restrictions matter? Using a formal model of fiscal policy to guide empirical analysis of data covering the American states from 1968 to 1987, we conclude that (1) aggregate state budget totals are driven by different factors under Democrats and Republicans, the net result being that Democrats target spending (and taxes) to higher shares of state-level personal income; (2) divided government is less able to react to revenue shocks that lead to budget deficits, particularly where different parties control each chamber of the legislature; and (3) unified party governments with restricted ability to carry deficits into the next fiscal year (outside the South) have sharper reactions to negative revenue shocks than those without restrictions.

No abstract

T his article examines whether and how institutional transparency and the polarization of political parties affect the scope for electoral cycles in fiscal policy. We show how access to information about fiscal policy matters for the existence of electoral cycles in public finances. Conditioning on the degree of fiscal policy transparency, we find that cycles are present in a sample of 19 advanced industrialized OECD economies, all fully developed and by no means recent democracies. We also find, consistent with the same theory, that electoral cycles are larger in more politically polarized countries. We thus provide evidence that electoral cycles in fiscal policy are not a phenomenon confined to or driven by weaker and newer democracies.Interest in the political business cycle, deliberate manipulation of economic policy instruments or outcomes in the vicinity of elections, is persistent. Originating with work on electoral cycles in unemployment and real income in the 1970s, many economists and political scientists investigated theoretical foundations for and empirical implications of the political business cycle. Evidence was mixed, and conclusions differed. Alesina, Roubini, and Cohen (1997) found post-election cycles in many James E. Alt is Frank G. Thomson professor of government, Harvard University,

We examine whether and when voters in American states hold elected officials accountable for the results of fiscal policy decisions. Clear fiscal policy effects appear in both gubernatorial and legislative elections between 1968 and 1992, independent of the effects of incumbency, coattails, term limits, and macroeconomic conditions. The results show that voters expect Democrats to provide higher levels of taxes and spending relative to state economies. Net of these expectations, Republican gubernatorial candidates lose votes if their party is responsible for unanticipated increases in the size of the state budget, but Democrats do not, and indeed may be rewarded for small increases.Independent of this, the incumbent party is punished for failing to maintain fiscal balance, and accountability is generally stronger following a period of unified party control than under divided government. Taken together, these results show how electoral accountability for fiscal policy outcomes is strong but highly contingent on a complex configuration of party labels, partisan control, expectations, and institutions.

The literature on cabinet duration is split between two apparently irreconcilable positions. The attributes theorists seek to explain cabinet duration as a fixed function of measured explanatory variables, while the events process theorists model cabinet durations as a product of purely stochastic processes. In this paper we build a unified statistical model that combines the insights of these previously distinct approaches. We also generalize this unified model, and all previous models, by including (1) a stochastic component that takes into account the censoring that occurs as a result of governments lasting to the vicinity of the maximum constitutional interelection period, (2) a systematic component that precludes the possibility of negative duration predictions, and (3) a much more objective and parsimonious list of explanatory variables, the explanatory power of which would not be improved by including a list of indicator variables for individual countries.

We explore the effect of the transparency of fiscal institutions in government on the scale of government and gubernatorial approval using a formal model of accountability. We construct an index of fiscal transparency for the American states from detailed budgetary information. With cross-sectional data for 1986–95, we find that—on average and controlling for other factors—fiscal transparency increases both the scale of government and gubernatorial approval. Our results imply that more transparent fiscal institutions induce greater effort by politicians, to whom voters give higher job approval, on average. Voters also respond by entrusting greater resources to politicians where fiscal institutions are more transparent, leading to larger government.

We exploit variation in U.S. gubernatorial term limits across states and time to empirically estimate two separate effects of elections on government performance. Holding tenure in office constant, differences in performance by reelectioneligible and term-limited incumbents identify an accountability effect: reelection-eligible governors have greater incentives to exert costly effort on behalf of voters. Holding term-limit status constant, differences in performance by incumbents in different terms identify a competence effect: later-term incumbents are more likely to be competent both because they have survived reelection and because they have experience in office. We show that economic growth is higher and taxes, spending, and borrowing costs are lower under reelection-eligible incumbents than under term-limited incumbents (accountability), and under reelected incumbents than under first-term incumbents (competence), all else equal. In addition to improving our understanding of the role of elections in representative democracy, these findings resolve an empirical puzzle about the disappearance of the effect of term limits on gubernatorial performance over time.E lections play two potential roles in representative democracy. First, elections may mitigate moral hazard by creating accountability; that is, politicians may take costly actions on behalf of voters because they know that they will only be reelected if their performance exceeds some standard (e.g., Barro 1973;Ferejohn 1986). Second, elections may mitigate adverse selection by allowing voters to select competent types who perform better, in expectation, than an unknown challenger. Moreover, in the absence of term limits, elections allow voters to retain incumbents whose competence has increased through experience (Padro i Miquel and Snyder 2006). Thus, over time elections may help voters weed out bad types and retain good types (e.g., Ashworth 2005; Ashworth and Bueno de Mesquita 2008;Fearon 1999;Gordon, Huber, and Landa 2007;Gowrisankaran, Mitchell, and Moro 2008;Zaller 1998). 1 Empirically distinguishing the accountability and competence effects of elections has proven difficult. While Fearon (1999) emphasizes a trade-off between accountability and competence (or selecting good types), in many theoretical models, both effects operate in the same direction (Ashworth 2005;Ashworth and Bueno de Mesquita 2006;Banks and Sundaram 1998;Besley 2006;Duggan 2000). Voters' threat to reelect only incumbents believed to be good types gives politicians an incentive to exert effort in order to try to convince voters that they are ''good'' (that is, more competent than they really are). For this reason, behavior by voters that alleviates adverse selection simultaneously alleviates moral hazard.We devise an empirical strategy to isolate the two effects by exploiting variation in the length of gubernatorial term limits. The basic argument is as follows. The relative performance of incumbents in the same term, some of whom are eligible to run again and some of whom a...

This paper describes a model of partisan fiscal adjustment where policy is made in a bicameral legislature subject to a veto by an independent executive. We show how changes in fiscal policy depend not just on the configuration of parties, but also on veto institutions and on which party or parties was responsible for the previous budget. In our model, the legislative party is unable to shift fiscal policy all the way to its preferred point in one step, but can take advantage of repeated shocks to shift fiscal policy toward its preferred target slowly, probably over several budget cycles. We describe how legislatures can use shocks to shift expenditures and revenues and how this means that over time one can observe persistence of past partisan targets or slower and faster shifts toward new targets. We show also how the amount of change in policy should vary according to how control is configured and how patterns of control interact with institutions.Empirical sections of this paper lay out a specification for estimating a model which is capable of incorporating these features, and report estimates based on taxes and spending in 35 nonsouthern states from . While the results are neither strong nor robust, estimated speeds of adjustment to targets line up as expected, with unified governments showing faster adjustment than divided, and the party targets go in the right direction, with Democrats apparently targeting a larger share of state incomes for the public budget than Republicans. Interestingly, Republicans react much more strongly to budget surpluses by reducing revenues than do Democrats. 5RNKV DTCPEJThe 1995 budget crisis in Congress produced a situation in which no formal budget passed and the government operated under a series of continuing resolutions which carried over the provisions of the previous year's budget. The result, long periods of uncertainty and conflict, focused attention on the political problem of fiscal adjustment in a bicameral system when parties are polarized in terms of having different partisan targets for the scale of taxes and public spending.In this paper we describe a model of partisan fiscal adjustment where policy is made in a bicameral legislature subject to a veto by an independent executive. We focus particularly on "split branch" government, where the legislature and the executive are controlled by different parties. We show how changes in fiscal policy depend not just on the configuration of parties, but also on veto institutions and on which party or parties was responsible for the previous budget. In our model, the legislative party is unable to shift fiscal policy all the way to its preferred point in one step. However, it is able to take advantage of repeated shocks to shift fiscal policy toward its preferences slowly, probably over several budget cycles.Our basic model and a few extensions show that budgets made under divided government can depend on a lot of features that we often think of as procedural details, like the identity of the "veto player," the l...