Economic and Political Determinants of State Spending

Policy in the American States, Erikson, Wright, and McIver (1993) study the effects of individual state partisanship and political ideology on state presidential voting. In general, they found that partisanship and ideology affected presidential voting independently of one another. In addition, from 1988 through 1992 (the last year of their study), they found that ideology became more important in explaining variation in presidential vote. Renner (1997) took this study further, and showed, using newer data, that since 1992, partisanship and ideology have become more equal in their explanation of tile variance in presidential voting. This article is available in Res Publica Journal of Undergraduate Research: http://digitalcommons.iwu.edu/respublica/vol3/iss1/3 Res Publica 5 Chris Dunlap Economic and Political Determinants of State Spending Introduction In their landmark work, Statehouse Democracy: Public Opinion and Policy in the American States, Erikson, Wright, and McIver (1993) study the effects of individual state partisanship and political ideology on state presidential voting. In general, they found that partisanship and ideology affected presidential voting independently of one another. In addition, from 1988 through 1992 (the last year of their study), they found that ideology became more important in explaining variation in presidential vote. Renner (1997) took this study further, and showed, using newer data, that since 1992, partisanship and ideology have become more equal in their explanation of tile variance in presidential voting. This study attempts to take these two studies even further, in an attempt to discover the effects these variables have on policy outputs. As Renner states in his article, "(partisanship and ideology) may not only add explanatory power to models predicting state presidential vote but public policy outputs as well" (14). Specifically, this study will attempt to determine the effect these variables have on overall levels of state spending. However, in determining the effect of these political variables on state spending, one cannot ignore the effect of economic variables on expenditure levels. The purpose of this paper is to determine the effects of both economic and political variables on state spending. The results of this test should give insight into how these factors affect levels of state spending, as well as defining the variables, either economic or political, to explain the variation. In the end, this paper hopes to determine whether states spend more money because they are richer and have a higher standard of living or whether a liberal ideology is driving their preference for the larger provision of public goods? Theory and Literature Review Thomas Dye (1966) was one of the pioneers in state policy studies. Dye concludes that economic variables are much more powerful than political variables in determining state policy. Furthermore, Dye asserts that economic variables are, essentially, the only important determinants of state policy. However, in previous research, empirical support has been given to both economic and political effects. This paper examines the theory behind the economic and political variables, and tests both groups of variables empirically. Economic ability-to-pay theory states that the income of a state should positively affect the expenditure level of that state. The theory says that a state