estimates of the returns to quality and coauthorship in economic academia salaries of academic economists are studied to determine if individuals receive differential returns to publishing articles of varying quality and to coauthored versus single authored articles estimates based on detailed data and a flexible nonlinear least squares procedure indicate that substantial returns to quality exist and that an individual s return from a coauthored paper with n authors is approximately 1 n times that of a single authored paper

local government grants and income tax revenue redistributive politics in norway 1900 1990 an important aspect of the welfare state is public provision of private goods primarily education and health care in norway the provision of these services has been organized through the local public sector the development of the welfare state has to a large extent been the development of welfare communes the important revenue sources of the local and county governments grants and income tax revenue have been controlled nationally and the paper addresses the determinants of these revenues during 1900 1990 the approach combines a demand model of local public services emphasizing price and income elasticities with a political economy model of central government ideology and strength the decision making is understood as bargaining between the government and interest groups and the political structure consequently is of importance for the policy outcome the analysis shows how politics matter and the results indicate that a minority coalition government implies 30 more grant and income tax revenue to local and county governments than one party majority in the long run

the resource curse revisited governance and natural resources the paper analyzes the impact of natural resource abundance on selected governance indicators we use a panel data set with observations on a large number of countries over an extended period of time and employ an instrumental variable technique to account for endogeneity the results show that exports of natural resources have above all led to an increase in corruption this result is robust to both different model specifications and an alternative indicator for natural resource abundance for other governance indicators such as law and order and bureaucratic quality we either find no results or results that lack robustness

politics and efficiency of separating capital and ordinary government budgets we analyze a golden rule that separates capital and ordinary account budgets and allows a government to finance only capital items with debt many national governments followed this rule in the eighteenth and nineteenth centuries and most u s states do today we study an overlapping generations economy where majorities choose durable and nondurable public goods in each period when demographics imply even moderate departures from ricardian equivalence the golden rule substantially improves efficiency examples calibrated to u s demographics show greater improvements at the state level or with nineteenth century demographics than under current national demographics

patterns of research output and author concentration in the economics literature this study finds that a strong bibliometric regularity exists in the publication pattern in the economics literature the number of authors publishing n papers is approximately 1 n superscript c of those publishing one paper the economics literature conforms very well to the model with c 1 84 if data are taken from a large collection of journals when applied to individual journals the result shows that values of c range from 2 04 to 3 11 this paper also reports the degree of author concentration among leading economics journals finally this study finds that the graduates of three graduate programs account for more than half of the top 100 authors indicates strong institutional dominance in the production of the most prolific authors copyright 1991 by mit press

line item veto where is thy sting roponents of giving the president the authority to use a line item veto argue that the institutional change is needed to limit special interest legislation and restrain spending opponents respond that it would grant too much added power to the president thereby upsetting the delicate balance wisely crafted by the founding fathers this article focuses on the presumption evidently shared by both sides in the debate that adoption of item veto authority will have significant consequences in terms of budget outcomes and the distribution of power 1 curiously there presently exists little empirical support for the presumption that item veto authority is important most studies comparing states with various types of veto authority have failed to detect significant effects associated with item veto additional tests of our own are consistent with these results after reviewing the empirical evidence we reconsider the alleged effects of item veto authority by seating the popular depiction in an explicit model of the budgetary process formal modeling exposes logical inconsistencies contained in popular veto discourse further the model makes clear that the predicted consequences of item veto commonly projected as ubiquitous in fact arise only in select settings

politics and the implementation of public policy the case of the us military housing allowance program are bureaucracies in fact controlled by the president congress or legislation we analyze a 1998 policy change in the department of defense s dod 6 5 billion annual military housing allowance program results show that both the president and congress were able to influence the bureaucracy even in the presence of an exceedingly specific law that outlined the manner in which the dod was to allocate the funds after policy implementation allowances were disproportionately higher in locations that a supported the president in the 1996 election and b were represented by members of the house or senate armed services committees

taxation and political business cycles in eu economies this paper examines whether incumbent national governments of 11 member states of the european union manipulated the tax policy instruments at their disposal in order to create national political business cycles opportunistic or partisan the empirical evidence based on data concerning the 1965 to 1997 period does not support this hypothesis rather it appears that governments have pursued stabilization policies

macroeconomic policy in a two party system as a repeated game this paper considers the interaction of two parties with different objectives concerning inflation and unemployment and rational and forward looking wage setters if discretionary policies are followed an economic cycle related to the political cycle results in equilibrium this cycle is significantly different from the traditional political business cycle reputational mechanisms due to the repeated interaction of the two parties and the public or commitments to a common policy rule can improve upon the discretionary outcome by reducing or eliminating the magnitude of the economic fluctuations

patterns of research productivity in the business ethics literature insights from analyses of bibliometric distributions in any academic discipline published articles in respective journals represent production units of scientific knowledge and bibliometric distributions reflect the patterns in such outputs across authors or producers closely following the analysis approach used for similar studies in the economics and finance literature we present the first study to examine whether there exists an empirical regularity in the bibliometric patterns of research productivity in the business ethics literature our results present strong evidence that there indeed exists a distinct empirical regularity it is the so called generalized lotka s law of scientific productivity pattern the number of authors publishing n papers is about 1 n c of those publishing one paper we discuss the likely processes that underlie the productivity pattern postulated by the generalized lotka s law we find that the value of the exponent c is equal to about 2 6 for the comprehensive bibliometric data across the two leading business ethics journals the observed research productivity pattern in the business ethics area a relatively young discipline is interestingly very consistent with those found in much older related business disciplines like economics accounting and finance we discuss the general implications of our findings

patterns of productivity in the finance literature a study of the bibliometric distributions this study finds a bibliometric regularity in the finance literature that the number of authors publishing n papers is about 1 nc of those publishing one paper we find that the finance literature conforms very well to the inverse square law c 2 if data are taken from a large collection of journals when applied to individual finance journals we find that values of c range from 1 95 to 3 26 we also find that top rated journals have higher concentrations among their contributors this implies that the phenomenon success breeds success is more common in higher quality publications it is frequently observed in bibliometric matters and in various social phenomena that success breeds success a frequently cited paper is more likely to be cited again than one little cited an author of many papers is more likely to publish again than one who has published little a journal which has been frequently consulted is more likely to be consulted again than one of previously infrequent use this is analogous to the folk saying the rich get richer and the poor get poorer lotka s law of scientific productivity is an example of such empirical laws lotka 1926 proposes an inverse square law relating authors of scientific papers to the number of papers written by each author specifically using data in the decennial index of chemical abstracts and in the name index of auerbach s geschichtstafeln der physik lotka plots the number of authors against the number of contributions made by each author on a logarithmic scale lotka finds that the points are closely scattered around a straight line having a slope of approximately negative two on the basis of this empirical observation lotka concludes the following in the cases examined it is found that the number of persons making 2 contributions is about one fourth of those making one the number making 3 contributions is about one ninth etc the number making n contributions is about 1 n2 of those making one and of all contributors the proportion that make a single contribution is about 60 percent thus lotka s empirical finding can be summarized by the equation an a1 n2 n 1 2 3 1

economic experiments hypothetical surveys and market data studies of insurance demand against low probability high impact risks a systematic review of designs theoretical insights and determinants of demand this paper provides a systematic review of the literature on 80 experimental hypothetical survey and market data studies of insurance demand against low probability high impact risks the objective of the review is to extract lessons from these studies and to outline an agenda for future research we contrast the results of experimental and survey studies to findings from market data we focus on experimental design methods insurance characteristics as well as results about theories heuristics behavioural biases and explanatory variables lessons for policymakers are drawn which can facilitate disaster preparedness

capital budgets borrowing rules and state capital spending abstract this paper compares the level and composition of government spending in u s states that maintain separate budgets for capital and operating expenditures with that in states that employ unified budgets it also investigates the effects of pay as you go financing rules for capital projects the empirical findings suggest that states with separate capital budgets spend more on public capital projects than comparable states with unified budgets there is no evidence that the presence or absence of a capital budget affects the level of non capital spending pay as you go requirements for financing capital projects are associated with lower levels of both capital and non capital spending

state responses to fiscal crises the effects of budgetary institutions and politics this paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits more restrictive state fiscal institutions such as no deficit carryover rules and tax and expenditure limitations are correlated with more rapid fiscal adjustment to unexpected deficits political factors are also important when a single party controls the state house and the governorship deficit adjustment is much faster than when party control is divided in gubernatorial election years tax increases and spending cuts are both significantly smaller than at other times

a note on the empirical effectiveness of formal fiscal restraints abstract an important agrument in the current debate over european monetary integration is that a monetary union requires formal fiscal restraints limiting individual member states budgetary powers to reduce the common monetary authority s risk of having to bail out insolvent member governments this note presents empirical evidence on the effectiveness of fiscal restraints on state budgets in the united states nonparametric tests reveal that fiscal restraints significantly affect the probability of fiscal choices and performance without however preventing extreme outcomes fiscal restraints induce substitution of nonrestricted for restricted debt instruments

allocating infection the political economy of the swine flu h1n1 vaccine i introduction public choice theory provides a fertile ground to analyze government activity traditional economic theory modeled public officials as pure optimizers of public welfare even at the expense of their private well being by allowing actors in the public sector the opportunity to respond to incentives public choice theory allows behavior that was once difficult to describe in the context of traditional economic models to become logical and rational if public choice theory is correct one would expect to see government officials acting in a manner such that individual self interest could displace the public good the distribution of the h1n1 or swine flu vaccine provides exactly such a forum for testing ii background congressional dominance and the h1n1 virus previous research has focused on the ability of congress to impose its preferences upon bureaus a scenario known as congressional dominance weingast and moran 1983 provide the theoretical framework by which a congressional incentive system emerges first in the budgetary process each agency competes with a host of others for budgetary favors congressmen pursuing their own electoral goals favor those agencies that provide the best clientele service second oversight plays an important role in sanctioning errant agencies this includes new legislation specific prohibitions on activities and other means that serve to embarrass agency heads hurt future career opportunities and foil pet projects finally and perhaps the most effective means of influence congress controls who gets appointed and reappointed weingast and moran 1983 the result is a political structure whereby congress wields substantial influence over the behavior of bureaus not only through direct means i e legislation appointments but also by creating the incentive for bureaus to serve the congress and more specifically the appropriate oversight committees pertaining to each individual bureau congressional dominance outlines one scenario in which legislators utilize their political advantage to secure personal benefits in addition to the congressional incentive system there exists a geographic nature to both the bureaucratic allocation of federal funds and political representation within congress the result of these institutional structures is a bureaucracy seeking to appease the members of its congressional oversight committee by providing a disproportionate share of public benefits to its constituents empirical evidence supporting the claims of congressional dominance theories initially focused on the activities of the federal trade commission in addition to the above study see calvert and weingast 1984 faith leavens and tollison 1982 katzmann 1984 and moran and weingast 1982 among others more recent research focuses on the impact that congress has on a wider range of bureaus young reksulak and shughart 2001 show that irs audit rates are lower in the congressional districts of members on key oversight committees of the irs garrett and sobel 2003 note that congressional oversight committees play a large role in determining the fiscal nature of fema disaster payments drury olson and belle 2005 show that the office of u s foreign disaster assistance responds to the preferences of congress when allocating humanitarian aid garrett marsh and marshall 2006 find a similar congressional influence concerning agricultural disaster relief sitting on a congressional committee has long been viewed as advantageous to the constituents of committee members see arnold 1979 ferejohn 1974 ritt 1976 among many others however identifying causality can prove difficult see for example ray 1980 rundquist and griffith 1976 as self selection could lead members of congress to be placed on committees the services of which their constituencies are particularly in need

using electoral cycles in police hiring to estimate the effect of police on crime comment previous empirical studies have uncovered little evidence that police reduce crime possibly due to simultaneity problems this paper uses the timing of mayoral and gubernatorial elections as an instrumental variable to identify a causal effect of police on crime increases in the size of police forces are shown to be disproportionately concentrated in mayoral and gubernatorial election years increases in police are shown to substantially reduce violent crime but have a smaller impact on property crime the null hypothesis that the marginal social benefit of reduced crime equals the costs of hiring additional police cannot be rejected

is success hereditary evidence on the performance of spawned ventures a common phenomenon in entrepreneurship is that employees turn away from employment to found their own businesses prior literature discusses the former employers characteristics that influence the creation of entrepreneurial ventures an investigation of whether these characteristics also affect the success of the spawned ventures is missing so far this paper contributes to the literature by showing that entrepreneurial ventures spawned by well performing firms are financially more successful than ventures stemming from poorly performing firms this suggests that spawned entrepreneurs are able to exploit valuable knowledge from their previous employers which impacts their ventures performance positively the analysis is based on a linked employee employer data set for the netherlands for the period 1999 2004

uncertainty of governmental relief and the crowding out of flood insurance this paper discusses the problem of crowding out of insurance by co existing governmental relief programs the so called charity hazard in the context of different institutional schemes of governmental disaster relief in austria and germany we test empirically whether an assured partial relief scheme as in austria drives a stronger crowding out of private insurance than a scheme promising full relief which is subject to ad hoc political decision making as in germany our general finding is that the institutional design of governmental relief programs significantly affects the demand for private natural hazard insurance

explaining the worldwide decline in the length of mandatory military service 1970 2010 compulsory military service has declined considerably since 1970 this explained by changes on both the extensive and intensive margins by governments while the decision to use conscription for military purposes has been studied extensively in this paper we examine empirically the factors underlying the decline in the duration of military service obligations employing data from the economic freedom of the world index observed at 5 year intervals from 1970 to 2010 we find that the probability of a shorter military service time is positively associated with smaller country populations smaller lagged army sizes increases in primary schooling among young males and having common law legal origins our empirical approach also highlights how the elderly population exhibits a nonlinear relationship with the length of conscriptees time in uniform

political uncertainty and public financing costs evidence from u s gubernatorial elections and municipal bond markets this research investigates how political uncertainty around u s gubernatorial elections in uences the borrowing costs of public debt measured by yields of municipal bonds our evidence from both the new issuance market and the secondary market shows that yields of municipal bonds increase sharply by 6 to 8 basis points before elections and then reverse afterward elections have more pronounced impact during economic downturns when outcomes are less predictable and when states have more outstanding debt several state institutions such as gaap budgeting spending limits and tax increase limits help to mitigate the adverse impact of political uncertainty

who pays for public employee health costs abstract we analyze the incidence of public employee health benefits because these benefits are negotiated through the political process relevant labor market institutions deviate significantly from the competitive private sector benchmark empirically we find that roughly 15 percent of the cost of recent benefit growth was passed onto school district employees through reductions in wages and salaries strong teachers unions were associated with relatively strong linkages between benefit growth and growth in total compensation our analysis is consistent with the view that the costs of public workers benefits are difficult to monitor contributing to benefit oriented and often under funded compensation schemes

divided government fiscal institutions and budget deficits evidence from the states 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

welfare measures when agents can learn a unifying theory we extend graham s 1981 welfare analysis under uncertainty to a dynamic environment where the agent can delay and obtain information the dynamic willingness to pay locus unifies the concepts of option price dynamic wtp commitment costs and quasi option value option price dynamic wtp corresponds to the ex ante wtp when the agent ignores recognises the learning opportunity the commitment cost or the difference between option price and dynamic wtp equals the annualised and monetised quasi option value state contingent contracts have added value by allowing trading among agents with heterogeneous access to future information and delay opportunities

do voters demand responsive governments evidence from indian disaster relief abstract using rainfall public relief and election data from india we examine how governments respond to adverse shocks and how voters react to these responses the data show that voters punish the incumbent party for weather events beyond its control however fewer voters punish the ruling party when its government responds vigorously to the crisis indicating that voters reward the government for responding to disasters we also find evidence suggesting that voters only respond to rainfall and government relief efforts during the year immediately preceding the election in accordance with these electoral incentives governments appear to be more generous with disaster relief in election years these results describe how failures in electoral accountability can lead to suboptimal policy outcomes

bureaucratic discretion or congressional control regulatory policymaking by the federal trade commission this paper extends stigler and peltzman s approach to regulation by incorporating a legislature the model yields comparative statics results and hence testable implications the paper then tests between two opposing approaches about regulatory agency behavior the first assumes agencies operate independently of the legislature and hence exercise discretion the second assumes that congress controls agency decisions the recent behavior of the federal trade commission provides the empirical setting substantial evidence is found for the specific predictions of the model including the hypothesis of systematic congressional influence over ftc decisions

electoral cycles in active labor market policies we examine how electoral motives influence active labor market policies that promote short term job creation such policies reduce measures of unemployment using german state data for the period 1985 to 2004 we show that election motivated politicians pushed job promotion schemes before elections

the industrial organization of congress or why legislatures like firms are not organized as markets this paper provides a theory of legislative institutions that parallels the theory of the firm and the theory of contractual institutions like market institutions legislative institutions reflect two key components the goals or preferences of individuals here representatives seeking reelection and the relevant transactions costs we present three conclusions first we show how the legislative institutions enforce bargains among legislators second we explain why given the peculiar form of bargaining problems found in legislatures specific forms of nonmarket exchange prove superior to market exchange third our approach shows how the committee system limits the types of coalitions that may form on a particular issue

the cost of governing strategic behavior of the president and legislators in brazil s budgetary process several characteristics of a political system have been identified as increasing the cost of governing such as presidentialism federalism an open list with proportional representation a multiparty system and coalition governments although brazil suffers from all of these pathologies the authors argue that other characteristics of the brazilian system have the opposite effect and allow high levels of governability at low cost in particular the authors examine the role of legislators amendments to the budget which provide the executive a low cost means of obtaining support the authors provide evidence that the brazilian president routinely uses his or her powers to reward and punish legislators for supporting or opposing his or her interests in congress although legislators have a limited role in the budgetary process that role can have important electoral consequences for their political careers

the probability of being president economic models of politics typically use the expected value of a candidate s vote share to proxy electoral probability in this paper the authors introduce a risk calculation to augment the evaluation of a candidate s or party s expected vote share and they divide this risk element into its systematic and unsystematic components for the same reason that systematic risk is a primary focus of portfolio management the authors discover that an analogous systematic risk component is central to presidential elections their approach accounts for correlations in vote swings among states piercing the fiction of a state by state or local campaign strategy copyright 1993 by mit press

government decision making and the incidence of federal mandates abstract this paper analyzes the effects of federally mandated program changes on state spending and revenues incorporating and evaluating the predictive value of several common theories of the state decision making process using several sources of exogenous increases in public medical spending i estimate that the entire state portion of the burden of mandated spending is borne by decreases in other public welfare spending while federal mandates may influence the composition of benefits at the state level it is much more difficult for them to change the total level of state transfers comparison of state reactions to different shocks suggests that these reductions are due in part to the substitutability of programs in the voter utility function but also in part to the stickiness of spending within budget categories states with greater racial differences between recipients and voters and states with less generous neighbors reduce other public welfare spending by even more alleviating the burden the medical expansions imposed on their taxpayers mandates may thus serve only to increase inequality across states

equilibrium political budget cycles political business cycle theories generally rely on nominal rigidities and voter myopia this paper offers an equilibrium theory that preserves some basic insights from earlier models though with significant refinements the political budget cycle emphasized here is in fiscal policy rather than output and inflation it arises via a multidimensional signal process one can consider the welfare implications of proposals to mitigate the cycle and the effects of altering the electoral structure copyright 1990 by american economic association

scholarships citations and salaries economic rewards in economics while substantial attention has been paid to the determinants of academics earnings 5 7 8 14 15 this literature has by implication suggested that the mere fact of having spent more time in the profession and the publication of more scholarly articles and books are the major determinants of salary differences our purpose here is to introduce a new determinant the quality of one s scholarly research measured by the frequency of references to that work as an additional objective measure of productivity we expect that this proxy for the extent of a scholar s influence on the work of other researchers is rewarded by the market in addition to giving a more complete picture of the determination of salaries in academic labor markets our approach should be useful in establishing a better framework for the evaluation of issues of discrimination in such markets than has been presented before 2 9

do state balanced budget requirements matter testing two explanatory frameworks balanced budget requirements bbrs affect all aspects of financial operations previous studies relied on characterizations that highlight a constitutional statutory distinction hou and smith public budgeting finance 26 3 22 45 2006 instead propose a political technical construct this article uses probit estimation six measures of balance and long panels to test which framework offers more explanatory power the findings suggest that bbrs matter to varying degrees technical requirements exert bigger effects than political ones the effects are more obvious on narrower than broader measures of balance and in the later phases of the budget cycle and the political technical construct offers more explanatory power than the constitutional statutory distinction

inter regional redistribution through infrastructure investment tactical or programmatic in this paper we study the political economy of the inter regional allocation of investment in infrastructure in an effort to disentangle tactical and programmatic motives where tactical politics refers to the discretionary allocation of investment to districts with more political clout and programmatic politics refers to the allocation of investment according to certain objective criteria e g income level we use a panel of data from the spanish electoral districts for the period 1964 2004 to estimate an equation in which investment depends both on economic and political variables the results show that tactical politics do matter since the districts receiving the most funds are those in which i the incumbent s vote margin is low ii few votes are needed to win an additional seat in the legislature iii the central and regional governments are controlled by the same party and iv regional parties play a pivotal role in the legislature however the results also show that programmatic politics matter since inter regional redistribution is shown to increase i with the arrival of democracy and european union funds ii under leftist governments and iii the weaker the correlation is between political clout and regional income

politics institutions and fiscal performance in a federal system an analysis of the argentine provinces abstract we posit that the fiscal behavior of argentine provinces is determined by a common pool game at two levels within each province and across political units in the latter game the national government has a greater incentive than the provincial governments to internalize the negative externality of fiscal imprudence given relatively strong party discipline the president is able to induce governors from his party to internalize a portion of the externality to a greater extent than opposition governors in argentina party matters for fiscal behavior but it does so for reasons different from those identified in studies of oecd countries

general revenue sharing and public sector unions abstract in this paper i find that in the context of a large intergovernmental general revenue sharing program implemented from 1972 to 1986 cities increased expenditures one for one with federal grants which is suggestive of a large flypaper effect furthermore i find that cities in states with pro union collective bargaining laws spent more than half of the transfers on increased wages while cities in states without such laws spent a greater fraction on increased government services these latter findings suggest that public sector unions play an important role in determining the usage and impact of intergovernmental grants

what explains the survival gap of pushed and pulled corporate spin offs abstract unconditionally pushed spin offs are found to survive longer than their pulled counterparts using matched employer employee data and novel multivariate decomposition techniques we show that pushed spin offs relative survival advantage is mostly explained by their larger human capital endowments at entry

the line item veto and public sector budgets evidence from the states abstract the paper examines the claim that gubernatorial line item veto power reduces state spending analysis of a rich set of state budget data indicates that long run budgets are not altered by an item veto and that in the short run the item veto s potency is contingent upon the political setting in certain circumstances governors with political incentives to use an item veto alter spending and revenues in a statistically significant and quantitatively important fashion these results suggest that state budgets have not been importantly altered as a result of the existence of the line item veto and shed doubt on the use of the line item veto to reduce federal government spending

the fiscal stress arising from state and local retiree health obligations a major factor weighing down the long term finances of state and local governments is the obligation to fund retiree benefits while state and local government pension obligations have been analyzed in great detail much less attention has been paid to the costs of the other major retiree benefit provided by these governments retiree health insurance the first portion of the paper uses the information contained in the annual actuarial reports for public retiree health plans to reverse engineer the cash flows underlying the liabilities given in the report obtaining the cash flows allows us to construct liability estimates which are consistent across governments in terms of the discount rate actuarial method and assumptions concerning medical cost inflation and mortality we find that the total unfunded accrued liability of state and local governments for the provision of retiree health care exceeds 1 trillion or about of total state and local government revenue relative to pension obligations discounted at the same rate we find that unfunded retiree health care liabilities are the size of unfunded pension obligations we also find that using assumptions concerning the growth in health care costs that are arguably more realistic than those employed by most states actually reduces the size of the liability in most cases pushing in the opposite direction we find that using plausibly more realistic mortality assumptions increases the size of liability the second portion of the paper places retiree health care obligations into context by examining the budget pressures associated with retiree health on a continuing largely pay as you go basis we find that much of the projected increase in retiree health obligations as a share of revenue is the result of health care cost growth on average states could put their retiree health obligations into long run fiscal balance by contributing an additional percent of total revenue toward the benefit each year there is however wide variation across the states with the majority of states requiring little in the way of additional financing but some states requiring a significantly larger increase

firm spin offs in denmark 1981 2000 patterns of entry and exit abstract this paper adds large sample evidence on the extent to which the likelihood of business failure or success is related to relationships between parent firms and their off spring for this purpose we make use of an exhaustive matched employer employee data set covering the entire danish private sector in years 1981 to 2000 to study firm entry and exit special focus is on spin offs a particular group of small entrants which are founded by groups of persons originating from the same former workplace we estimate a multinomial logit model in order to examine which characteristics of the founders and the parent firms increase the probability of spinning off next we carry out a duration analysis of the subsequent transitions of the spin offs and compare their exit risks with those of other entrant firms which have less strong parent progeny relationships in terms of worker flows

defining the government s debt and deficit although the budget deficit and the public debt feature prominently in political debate and economic research there is no agreement about how they should be measured they can b e defined for different sets of public institutions including the nested sets corresponding to central government general government and the public sector and for any definition of government there are many measures of the debt and deficit including those generated by four kinds of accounts cash financial full accrual and comprehensive which can be derived from four nested sets of assets and liabilities each debt and deficit measure says something about public finances but none tells the whol e story each is also vulnerable to manipulation and is likely to be manipulated if it is subject to a binding fiscal rule or target narrow definitions of government encourage the shifting of spending to entities outside the defined perimeter of governme nt narrow definitions of debt and deficit encourage operations involving off balance sheets assets and liabilities while broad measures are susceptible to the mismeasurement of on balance sheet assets and liabilities reviewing the literature on these is sues the paper concludes that governments should publish several measures of the debt and deficit in a form that clearly reveals their interrelationships

taxes subsidies and insurance as drivers of united states coastal development abstract ever increasing coastal populations in the united states and worldwide are putting growing quantities of people and property at risk due to coastal disasters at the same time poorly planned development policies and practices erode the natural capital of coastal regions eliminating existing landscape protection from intense wind and waves government tax subsidy and insurance policies can encourage or discourage particular forms of development in the u s there is no consistent set of incentives or disincentives for coastal development and many programs have ambiguous or contradictory goals federal programs are highly fragmented being administered by a variety of government agencies state and local governments can also implement policies to improve coastal disaster protection but often fail to do so in other cases state and local policies designed for local economic growth work against the goals of federal policy increasing flood damage risk while relying on federal aid once disaster does strike these programs frequently lead to perverse subsidies where economically inefficient policies degrade natural capital and foster economic inequality in this study we evaluate the existing tax subsidy and insurance structures that led to coastal development patterns on the u s gulf coast over the last sixty years and propose alternative policies that could create a more sustainable just economically efficient and storm adaptive region

the political determinants of fiscal policies in the states of india an empirical investigation abstract using data from the 14 major states of india we investigate whether state governments fiscal policy choices are tempered by political considerations our principal findings are twofold first we show that certain fiscal policies experience electoral cycles state governments raise less commodity tax revenue spend less on the current account and incur larger capital account developmental expenditures in election years than in all other years second we show that coalition state governments raise less own non tax revenues and spend less on the current account than state governments that are more cohesive in composition in sum the dispersion of political power affects government size

testing the rationality of state revenue forecasts recent revenue shortfalls in several states focus attention on the question of whether states do a good job of forecasting revenues in modem economics forecasts are eval uated on the basis of whether or not they are rational do the forecasts optimally incorporate all available information this paper develops a method for testing the rationality of state revenue forecasts and applies it to the analysis of data from new jersey massachusetts and maryland one of our main findings is that in all three states the forecasts of own revenues are systematically biased downward tn 1985 the 50 states raised 349 billion in revenues from their own sources and received 84 billion in grants from the federal government u s bureau of the census 1987 p 266 state governments are clearly important players in the u s system of public finance and the efficiency with which they conduct their financial affairs has an important impact on consumer welfare one important determinant of a state s ability to con duct reasonable fiscal policies is the quality of its revenue forecasts sensible deliberations about ex penditures cannot be made in the absence of good forecasts indeed in the presence of con stitutional or statutory provisions for balanced budgets unanticipated changes in revenues can wreak havoc not only on proposals that are sched uled for funding but on plans that have already been put into effect as well in recent months two powerful governors michael dukakis of massachusetts and mario cuomo of new york have suffered major politi cal embarrassments because actual revenues fell substantially short of the predictions in their re spective states such episodes focus attention on the question of whether states do a good job of forecasting revenues in modem economics fore casts are evaluated on the basis of whether or not they are rational do the forecasts optimally incorporate all information that is available at the time they are made although there is a large literature on state revenue forecasting methods that literature focuses mostly on state budgetary institutions forecasts themselves are evaluated only in an informal fashion 1 although the theory and econometric methods of rational expectations have been used to evaluate forecasts made by households and businesses 2 these powerful tools have not been applied to state government fore casts this paper applies these methods to the problem of state revenue forecasting and as an example uses them to analyze data from new jersey massachusetts and maryland the results cast light not only on the question of rationality per se but on issues such as the impact of political factors on forecasts section ii presents the conceptual framework for testing rational expectations the relevant in stitutional issues and data are described in section iii the results are discussed in section iv we find that in all three states forecasts of own rev enues are systematically biased downward section v concludes with a summary

the impact of ad hoc disaster and crop insurance programs on the use of risk reducing conservation tillage practices the paper estimates the impacts of risk reducing government programs on the use of conservation tillage no till and other conservation tillage practices in agriculture conservation tillage can be used to reduce production risk from weather shocks however subsidized crop insurance and disaster payments also reduce risk through financial assistance the paper examines the extent to which risk reducing tillage practices and government programs are substitutes for each other the economic model shows that a decline in average weather conditions increases the use of conservation tillage the economic model also shows that the impact of weather risk and risk aversion on risk reducing practices like conservation tillage are ambiguous the effect depends on the degree that losses are offset by government payments the paper uses county level tillage practice data from the conservation tillage information center for the three state region of iowa nebraska and south dakota results are estimated using instrumental variables and spatial panel data techniques instruments for the program participation and payment data include political variables and weather data the empirical analysis shows that recent disaster and indemnity payments are associated with an increase in the use of no till and a decrease in the use of other conservation till results also show that producers in counties with recent drought and flood events are more likely to use other conservation tillage the results imply that there may be unintended impacts of changes to agricultural policies like disaster payments and crop insurance on the use of on farm conservation practices

the congressional bureaucratic system a principal agent perspective with applications to the sec this paper provides the theoretical perspective and empirical support for congressional dominance of agency decisions my thesis is twofold first because much of the previous evidence on this question is not evidence at all many scholars intuition and conclusions are based on a logically flawed foundation second i have provided here and in previous work a look at a variety of different agencies and in each case have shown how the events can plausibly be interpreted as involving congress agency problems within the congressional bureaucratic system are real and substantial just as they are within corporations however as in the latter institutional forms develop within the congressional system to partially if not wholly mitigate these problems the logical perspective together with the evidence provide a strong case against the agency dominance hypothesis as typified by the early sections of niskanen 1971 and wilson 1980

the political economy of fema disaster payments a central contribution of public choice theory to the analysis of government activity is in viewing the activities of government not as determined by some single altruistic dictator but rather as the result of a process involving individual political agents who react to the incentives they face federal disaster relief administered by the federal emergency management agency fema is one activity that is ripe for political influence due to the process of disaster declaration and relief after a disaster strikes a particular state the governor makes a request to the president for disaster assistance following a governor s request the president then decides whether to declare the state or region a disaster area only after a disaster has been declared by the president can disaster relief be given fema is in charge of determining the level of relief funding for the area but additional appropriations are determined by congress in cases requiring large amounts of funding beyond fema s allocated budget the act which governs the rules of federal disaster declaration and expenditures gives the president the authority to declare a disaster without the approval of congress

election or disaster support in this study i explore whether the public spending provided in response to a natural disaster is affected by upcoming elections the theory on retrospective voting argues that politicians are kept responsible by the electorate for the damage caused by a natural catastrophe at the same time voters reward government officials when they react promptly by taking actions that limit the negative consequences thus disaster support in the aftermath might not always only be provided to improve the economic situation after a disaster but also for political purposes my estimates seem to confirm this idea since roughly 10 per cent of the disaster related public spending provided in an election year is attributed to rent seeking rather than need it turns out that the existence of these election cycles can partly be explained by cross country differences for instance elections have a stronger effect in countries that are characterised by fewer checks and balances presidential system and majority elections one interesting result is that the role of media in electoral manipulation changes when a disaster has happened in the year before

political parties and the business cycle in the united states 1948 1984 this paper tests the existence and the extent of a politically induced business cycle in the u s in the post world war ii period the cycle described in this paper is different from the traditional political business cycle of nordhaus it is based on a systematic difference between the monetary policies of the two parties in a model with labor contracts from an explicit optimization problem we derive a system of equations for output and money growth then we successfully test the non linear restriction imposed by the theory on the parameters of the system of equations we cannot reject the hypothesis that money growth has been systematically different under the two types of administration and that this difference contributes to explain output fluctuations

majority rule bargaining and the under provision of public investment goods abstract despite evidence that modern democracies systematically shortchange public investment goods relatively little theoretical work exists to explain this phenomenon we build on baron and ferejohn s american political science review 83 4 1989 1181 1206 bargaining model to describe public investments in a setting of budgetary politics specifically we show that underinvestment inherently arises from distributive politics within a majoritarian institution the inability of current majorities to contract with future ones drives a wedge between spending on consumption today and investing for future consumption extensions to the model demonstrate that earmarking future returns to specific players and or detaching consumption from investment decisions yields more efficient levels of public investment

the effects of adaptation measures on hurricane induced property losses which fema investments have the highest returns abstract this paper evaluates the relative effectiveness of fema expenditures on hurricane induced property losses we find that spending on fema ex ante mitigation and planning projects leads to greater reductions in property losses than spending on ex post adaptation programs specifically a one percent increase in annual spending on ex ante risk reduction and warning projects reduces damages by 0 21 percent while a one percent increase in ex post recovery and clean up spending reduces damages by 0 12 although both types of program spending are effective we find the marginal return from spending on programs that target long term mitigation and risk management to be almost twice that of spending on ex post recovery programs with the predicted increases in the frequency and severity of north atlantic hurricanes in the future our findings suggest there are important potential gains that could be realized from the further diversification of fema spending across project categories

legislative term limits and state spending supporters of legislative term limits often claim that they will lower state spending levels using fiscal data from 48 states from 1977 to 2001 this paper finds little support for this assertion instead this analysis finds that states with term limits have higher spending levels than states without term limits these results suggest that term limits give legislators greater incentives to deviate from socially optimal fiscal policy by altering the legislative environment in which such policy is formulated

property tax revaluation and tax levy growth abstract jurisdiction wide property revaluation like many administrative reforms may have unintended consequences this paper examines one such potential consequence by pooling 18 year time series for each of 39 massachusetts cities 17 of which revalued and 270 massachusetts towns 202 of which revalued we examine the hypothesis that politicians take advantage of the confusion generated by revaluation and raise property taxes by more than they otherwise would have we observe such a response in cities but not in towns and attribute this difference to differences in their governmental structures

hybrid entrepreneurship and public policy the case of firm entry deregulation hybrid entrepreneurs are entrepreneurs who are simultaneously working as paid employees although they constitute a systematic and large part of new firm creation their possibly distinct responsiveness to public policy is not yet studied arguing for the need to consider hybrid entrepreneurs in public policy we analyze the introduction of one stop shops for faster and simplified firm registration in mexico we find that hybrid entrepreneurs are more responsive to changes in entry regulation than full time entrepreneurs while both the best and least educated people respond to the reform the effect is most pronounced for highly educated hybrid entrepreneurs

strategic behavior by federal agencies in the allocation of public resources how do government agencies allocate program resources some authors presume that agencies seek to maximize program objectives others suggest agencies favor the districts important to the president s election in addition agencies may distribute larger program resources to those districts whose congressional representatives are best positioned to help the agency we examined how federal government agencies responded both to the 2006 election when control of congress shifted from the republican to the democratic party and to the 2010 election when the house switched from democratic to republican control we used a difference in difference analysis to evaluate the impact of each election on the agencies allocations of contracts agencies generally responded to the elections by allocating more contract resources to districts represented by the winning party however federal agencies reacted differently to changing political environments depending on the characteristics of the agency for example after the 2006 election those agencies with programs favored by republican members of congress allocated more resources to democratic districts these republican agencies presumably are the most vulnerable to the risk of losing future appropriations democratic agencies and neutral agencies facing no significant threats to their appropriations did not respond to the election as strongly finally more vulnerable districts received the most support especially by the republican agencies we reaffirmed these results by using the 2010 congressional elections in which the political orientations of the districts favored with more contract distributions was reversed

are cash budgets a cure for excess fiscal deficits and at what cost abstract this paper investigates the effect of recent reforms of budgetary institutions in uganda and zambia we argue that cash budgeting has brought clear benefits in terms of improved expenditure control with regard to line ministries contrary to what is often suggested however adoption of a cash budget has not provided a means for top politicians in either country to tie their hands with respect to intervention in fiscal policy decisions in uganda improved fiscal policy outcomes have in fact been achieved as a result of and not in spite of discretionary interventions by top politicians in zambia a strict rule imposing a balanced budget on a monthly basis has proven partially effective due in no small part to international monetary fund imf enforcement but costly in terms of increased volatility of expenditures

the determinants of off budget activity of state and local governments the primary finding of this paper is that the off budget activity of the public sector is significantly and positively related to on budget activity by state and local governments we suggest the following policy implications one there appears to be evidence that the composition of total government activity is related to the relative costs of the alternative avenues of providing governmental activity future research into determining the nature of the relative cost differences may be one useful means of understanding both the composition of government activity as well as its total size two our ability to measure the true size of public sector participation in the economy must go well beyond our attempt here while we have presented information on one of the important hidden elements of public sector participation we are still a long way from effectively incorporating similar data on legislation regulations and so forth into our empirical tests further research into these issues is clearly warranted

electoral misgovernance cycles evidence from wildfires and tax evasion in greece we present detailed empirical evidence from greece that around elections misgovernance results in significant increases in wildfires and tax evasion and has important economic implications these effects have led to the destruction of property or loss of government revenue estimated at 8 of gdp there are two plausible reasons why misgovernance might intensify around elections i attention and effort of elected officials is directed to campaigning instead of governing and ii the misgovernance may benefit special interests and serve as a pork barrel transfer that is hard to monitor or control empirically we find that redistributive politics are likely a dominant cause of electoral misgovernance in the case of wildfires we also find evidence that political competition tends to increase electoral misgovernance furthermore electoral misgovernance helps incumbents get reelected while misgovernance may manifest differently among countries our analysis suggests that electoral cycles everywhere may be much more multifaceted and harmful than previous literature suggests

presidential elections and federal reserve policy an empirical test traditional macro economic models of federal reserve fed behavior typically assume that the fed enjoys a well defined objective function based on social welfare and generally predict counter cyclical monetary policy the increasing observation of procyclical monetary policy has led many researchers to investigate new models of fed behavior several recent papers imply that procyclical fed behavior is due to a lack of political accountability friedman 7 toma 23 and shughart and tollison 21 all attribute considerable bureaucratic discretion to the fed and seek to explain monetary policy by examining typical bureaucratic objectives other papers such as pierce 19 20 weintraub 26 and kane 10 11 argue that the fed operates in an arena filled with political constraints that cause sub optimal monetary policy but these constraints are not modeled explicitly one possible political constraint on fed behavior is the incumbent president s desire for re election in the political business cycle pbc literature presidential re election opportunities are enhanced by the production of a precise set of inflation and unemployment outcomes leading up to the election thus to the extent that presidents desire cyclical macro economic outcomes there will be executive pressure on the fed to create or accommodate such outcomes the effect this pressure will have on fed policy is ultimately an empirical question but most models deal with it by assumption traditional macro modeling assumes a zero effect while the pbc models implicitly assume that a favorable election cycle is a primary goal of all economic policymakers this paper examines presidential influence on the federal reserve by testing for an election cycle in money growth the major result is the identification of a regular 16 quarter cycle in money growth corresponding with presidential elections this cyclical effect is found to be stable over time and significant under a wide range of model specifications further when the cyclical component of money growth is used to simulate a simple macro model it produces a classic political business cycle in inflation and real output growth

does federal disaster assistance crowd out flood insurance abstract we empirically analyze whether federal disaster aid crowds out household purchase of disaster insurance we combine data on annual household flood insurance purchases for the united states over the period 2000 2011 with data from the two main u s post disaster federal aid programs fema s individual assistance grants and sba s low interest disaster loans estimating both fixed effects and instrumental variable models to account for the endogeneity of disaster assistance grants we find that receiving individual assistance grants decreases the average quantity of insurance purchased the following year by between 4000 and 5000 the reduction we find is roughly 3 of the mean insurance coverage in the sample but larger than the average flood related ia grant in our sample which is 2984 ia is currently limited and larger grants could have different impacts the crowding out is on the intensive margin we find no impact on take up rates likely because there is a requirement that recipients of disaster aid purchase an insurance policy we do not know how take up rates might change without such a requirement low interest post disaster government loans have no systematic effect on insurance purchases

tax innovation in the states capitalizing on political opportunity this paper assesses the factors that prompt states to adopt taxes during the twentieth century we test five explanations of state tax innovation derived from the literature economic development fiscal health election cycle party control and regional diffusion using event history analysis a pooled cross sectional time series technique while little support is found for the economic development and party control explanations our empirical results are highly consistent with a political opportunity explanation of state tax adoptions 1 the presence of a long time until the next election 2 the existence of a fiscal crisis and 3 the presence of neighboring states that have previously adopted a tax all create opportunities for politicians to shield themselves from the political costs of supporting a tax increase and are all shown by empirical analysis to increase the probability of a tax adoption this empirical evidence is consistent across different tax instruments and different periods of analysis throughout the twentieth century

exogenous shocks and democratic accountability evidence from the caribbean this study attempts to contribute to the growing debate over democratic accountability by focusing on the electoral impact of natural disasters and economic crises in the caribbean although largely ignored by political science the polities in the region share a long history of democratic governance as well as extreme vulnerability to adverse weather conditions and global economic fluctuations the caribbean thus offers unusually fertile opportunities for research on the capacity of voters to make rational electoral decisions two key questions are addressed first to what extent do citizens of the caribbean punish incumbents for exogenous economic and climatic shocks second what factors if any help to insulate democratic leaders from blame for conditions largely outside their control contrary to recent research on natural disasters and economic downturns in other contexts the analysis provides no evidence that voting in the caribbean has been characterized by systematic attribution errors or elec

voting on the budget deficit this paper analyzes a model in which a group of rational individuals votes over the composition and time profile of public spending all voters agree that a balanced budget is ex ante optimal however if there is disagreement between current and future majorities a balanced budget is not a political equilibrium under majority rule under certain conditions a majority of the voters favors a budget deficit and the equilibrium deficit is larger the greater is the polarization among voters copyright 1990 by american economic association

fiscal transfers and fiscal sustainability we examine whether the u s and german state governments pursue sustainable fiscal policies taking into account fiscal transfers using panel data techniques we investigate whether the debt to gdp ratio had a positive influence on the primary surplus bohn model we show that including excluding fiscal transfers changes the results if fiscal transfers are not included in the primary surplus the test results do not indicate that the u s and german state governments pursued sustainable fiscal policies our results also suggest that fiscal transfers were positively related to debt these findings indicate that intergovernmental transfers have implicitly subsidized debts

recovery and reinvestment act spending at the state level keynesian stimulus or distributive politics we examine the us state level pattern of american recovery and reinvestment act arra spending we relate spending to 1 keynesian determinants of countercyclical policy 2 congressional power and dominance and 3 presidential electoral vote importance we find that the arra is in practice poorly designed countercyclical stimulus after controlling for political variables coefficients on keynesian variables are often statistically insignificant when they are statistically significant they are often the incorrect sign on the other hand statistically significant effects are associated with majority party house of representative appropriations subcommittee and authorization committee membership one striking result is that the elasticity of arra spending with respect to the pre arra ratio of federal grants and payments to federal taxes paid is estimated to be greater than unity in most specifications states previously capturing large amounts of federal funds continue to do so under the arra stimulus

informing climate adaptation a review of the economic costs of natural disasters abstract this paper reviews the empirical literature on the economic impacts of natural disasters to inform both the modeling of potential future climate damages and climate adaptation policy related to extreme events it covers papers that estimate the short and or long run economic impacts of weather related extreme events as well as studies identifying the determinants of the magnitude of those damages including fatalities the paper also reviews the small number of empirical papers on the potential extent of adaptation in response to changing extreme events

direct democracy and public employees in the public sector employment may be inefficiently high because of patronage and wages may be inefficiently high because of the strength of public employee interest groups this paper explores whether the initiative process a direct democracy institution of growing importance can control these political economy problems as proponents and some research suggests based on a sample of 650 cities in 2000 i find that when public employees are not allowed to bargain collectively and patronage may be a problem initiatives appear to cut employment but not wages when public employees are allowed to bargain collectively driving up wages the initiative appears to cut wages by about 4 percent but has no measurable effect on employment the employment cutting result is quite robust surviving a number of robustness tests the wage cutting result survives some but not all robustness tests

opportunistic political cycles test in a young democracy setting this paper tests the theory of opportunistic cycles in a decade old democracy russia finds strong evidence of cycles and provides an explanation for why previous literature often found weaker evidence using regional monthly panel data we find that 1 the budget cycle is sizable and short lived public spending shifts toward direct monetary transfers to voters 2 the magnitude of the cycle decreases with democracy government transparency media freedom voter awareness and over time and 3 preelectoral manipulation increases incumbents chances for reelection the short length of the cycle explains underestimation of its size by previous literature because of low frequency data used in previous studies

the political economy of the essential air service program we find that congressional influences affect the amount of airport subsidies that a congressional district receives through the essential air service eas program the eas program was passed with the goal of helping to continue commercial air service to rural communities following deregulation in the 1970s using data from 1998 2014 we find strong and consistent evidence that subsidies are higher in districts having congressional representation on the house transportation and ways and means committees our empirical results when combined with news reports of members claiming credit for securing eas funding are consistent with the eas serving private and public interests

defining the government s debt and deficit defining the government s debt and deficit although the budget deficit and the public debt feature prominently in political debate and economic research there is no agreement about how they should be measured they can be defined for different sets of public institutions including the nested sets corresponding to central government general government and the public sector and for any definition of government there are many measures of the debt and deficit including those generated by four kinds of accounts cash financial full accrual and comprehensive which can be derived from four nested sets of assets and liabilities each debt and deficit measure says something about public finances but none tells the whole story each is also vulnerable to manipulation and is likely to be manipulated if it is subject to a binding fiscal rule or target narrow definitions of government encourage the shifting of spending to entities outside the defined perimeter of government narrow definitions of debt and deficit encourage operations involving off balance sheets assets and liabilities while broad measures are susceptible to the mismeasurement of on balance sheet assets and liabilities reviewing the literature on these issues the paper concludes that governments should publish several measures of the debt and deficit in a form that clearly reveals their interrelationships

on the mis measurement of legislator ideology and shirking in this paper we show that current statistical measures of legislator s shirking are implicitly based on the electoral concept of a unique majority rule equilibrium point in the policy space where elections are contested we note that such equilibria do not exist generically and present statistical results showing that cross sectional regressions where legislators voting indices are predicted by district average demograhic and economic data are mis specified we also discuss a weaker equilibrium construct the uncovered set and present statistical evidence showing that differences in voting behavior between senators from the same state are positively related to the heterogeneity of the electorate we argue that current evidence alleged to show shirking by senators is equally consistent with senators who perfectly represent an idiosyncratic constituency that cannot be represented by district average data

an exogeneity test for a simultaneous equation tobit model with an application to labor supply a test of weak exogeneity in the simultaneous equation tobit model is proposed and illustrated using a female labour supply model estimated using cross section data the test statistic can be simply output from any standard tobit maximum likelihood package and is asymptotically efficient the procedure provides consistent estimators for the simultaneous tobit model whose asymptotic covariance matrix is a simple extension of the usual tobit formula we also provide the lagrange multiplier test of weak exogeneity this abstract was borrowed from another version of this item

the impact of federal spending on house election outcomes while it is widely believed by academics politicians and the popular press that incumbent members of congress are rewarded by the electorate for bringing federal dollars to their district the empirical evidence supporting that claim is extremely weak one explanation for the failure to uncover the expected relationship between federal spending and election outcomes is that incumbents who expect to have difficulty being reelected are likely to exert greater effort in obtaining federal outlays since it is generally impossible to adequately measure this effort the estimated impact of spending is biased downward because of an omitted variable bias we address this estimation problem using instrumental variables for each house district we use spending outside the district but inside the state containing the district as an instrument for spending in the district federal spending is affected by a large number of actors e g governors senators mayors and other house members in the state delegation