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The paper introduces the possibility of coalition government into the theoretical study of political accountability and analyzes the accountability of coalitions as a problem of team production. It is shown that coalition governments can be held accountable in the presence of an electoral alternative. Accountability becomes problematic if it is certain that at least one of the coalition parties stays in power after the elections. Such a coalition (sometimes called a ‘unity government’) can not be given appropriate collective incentives. To incentivate government performance, voters make one coalition party responsible for the outcome. This, however, makes the other coalition party interested in sabotage. The paper analyzes the resulting conflict and characterizes optimal voter strategy.

This paper provides new evidence on the determinants of entrepreneurship across countries. The paper investigates the relationship between the institutional setting, in terms of economic freedom, and entrepreneurship, measured by self-employment, in a panel data setting covering 23 OECD countries for the period 1972–2002. The measure of economic freedom includes five aspects: size of government, legal structure and security of property rights, access to sound money, freedom to trade internationally, and the regulation of credit, labour and business. The empirical findings show that a smaller government sector, better legal structure and security of property rights, as well as less regulation of credit, labour and business tend to increase entrepreneurship.

This paper investigates the behavior of rent-seeking politicians in an environment of increasing economic integration. The focus of the paper is on the implications of globalization-induced political yardstick competition for constitutional design with a view to the current discussion in the European Union. In contrast to the established literature, we carefully portray the double-tiered government structure in federal systems. The number of lower-tier governments and the allocation of policy responsibilities to the two levels of government are subject to constitutional choice.

Theories of the size of government focus on either the demandfor government or the supply of tax revenues. Demand sidetheories such as those of Peltzman, Meltzer and Richard,Husted and Kenny, and Lott and Kenny are essentially politicaltheories. They emphasize the role of voters or interest groupsin expanding government. Supply side theories such as those ofKau and Rubin, Baumol, West, and Ferris and West emphasize theability of government to collect taxes. In this paper, wecombine both demand and supply side theories. For demand, weuse the Poole-Rosenthal time series data on the ideology ofCongress, on the theory that all political forces mustultimately express themselves in voting which is measured byideology. For supply, we use the Kau-Rubin measures of theability of government to collect taxes as a function of thedeadweight costs of tax collection and ability of individualsto hide revenues. We find that female labor forceparticipation and the associated ability to tax femaleproductivity is the most important factor associated withgovernment, and it alone explains about 60% of the actualgrowth of government. The ideology of the Senate is alsosignificant, but has a small effect. This paper may be thefirst to examine the influence of ideology on the time path ofa policy; other research examining ideology (including ours)has been cross sectional. Further research on the role ofideology in changing policies over time is clearly warranted.

Most of the empirical work on the optimal size of the fiscalstate has linked the level of taxation to economic growth. Inthis paper the level of government consumption expenditure thatyields the maximum physical quality of life is found, along withthose expenditures that cause equality between marginal benefitand marginal government expenditure out of GNP. Careful attentionis paid to the measurement of the physical quality of life, theweighing of the attributes in the construction of an aggregateindex of quality of life, and in the functional (parametric) formof the nonlinear equations utilized to calculate marginalbenefit. The conclusion of the paper is that governmentconsumption expenditure is considerably higher than is necessaryto maximize the physical quality of life, and that a reductionin government consumption expenditure would not lower quality oflife.

This paper uses a dynamic general equilibrium model i) toinvestigate how changes to different spending and revenue items of the budgetaffect economic activity and public finance; and ii) to evaluate thewelfare costs of alternative fiscal policy maneuvers. The paper shows that,unlike an increase in government purchases of final goods, an increasein public employment and transfers can have a contractionary effect onthe economy in the same way as a rise in tax rates. It also suggests thatfiscal adjustments implemented by cutting spending items increasehouseholds' welfare and are more effective in reducing the primary deficitand public debt than are increases in tax rates.

Is anarchy a viable, desirable form of organization of society? Anarchy intrigues economists as the limit of the process of privatization—can all government’s functions be turned over to market forces? In the early 1970s, Winston Bush led an exploration of anarchy at the Public Choice Center at Virginia Tech. The new book Anarchy, State and Public Choice, edited by Edward Stringham, brings together some of the old school public choice contributions with contemporary research. The book consists of seven papers reprinted from Gordon Tullock’s edited volumes, Explorations in the Theory of Anarchy and Further Explorations in the Theory of Anarchy, along with six modern responses and four original retrospective/prospective papers. The reprinting of some of the earlier papers should provide new life into this research and the paired contemporary papers illustrate that significant progress has been made in the intervening decades. A paper by Winston Bush from Explorations on equilibrium in an anarchy model and a response by Jason Osborne lead off the volume. Bush’s paper is a now familiar description of the equilibrium in an anarchy economy, emphasizing the natural distribution of income resulting from comparative advantage in predation. Osborne offers an intriguing two part response. The first examines the impact of a contract enforcer on relative well-being in the Bush anarchy economy, while the second considers the implications of research on contingent cooperation in a prisoner’s dilemma. Recent research emphasizes the benefits of contingent cooperation and how well-developed abilities to detect cheating allow the prisoner’s dilemma to be overcome without third party enforcement, increasing the potential for a workable anarchy. The next two papers from Explorations by Gordon Tullock and J. Patrick Gunning, and the contemporary responses by Christopher Coyne and Peter Leeson, deal with contract enforcement. Tullock and Gunning argue that government must enforce contracts, particularly deals over time or when one party has a lot at stake. The replies by Coyne and Leeson draw

Using annual state-level data over 1983–1987, this paper examines the effect of government size on corruption by public officials by including both demand and supply side incentives for engaging in corrupt practices. Our objectives are twofold. First, we assess the relationship between the incidence of corruption and overall measures of the size of the federal government and the state-local sector in each state. Second, we explore what kinds of government activities are more likely to be successful in deterring abuse of public office. Our results are generally supportive of Becker's “crime and punishment” model. Regarding the primary focus of the paper, our results show that government size, in particular spending by state governments, does indeed have a strong positive influence on corruption.

Intergovernmental grants have been conventionally explained on the basis of either equity/efficiency and/or institutional considerations. This paper seeks to model Australian intergovernmental grants by including both traditional public finance variables and public choice influences; that is, grants are used by federal government politicians to purchase political capital, thereby enhancing their own chances of reelection. The models employed in this paper are tested for six Australian states for the period 1981-82 to 1991-92 using unsystematic grant transfers. The results provide support for these public choice considerations, and highlight the importance of incorporating institutional factors and controlling for misspecification in the error structure in estimates of this type.

Economics Research Centre, School of Economic and Social Studies, University of East Anglia, Norwich NR4 7TJ, U.K. The paper investigates the claim of Gylfason and Lindbeck (Public Choice, 1994) that a stagflationary bias arises from the interaction between monetary policymaking and wagesetting if, among other things, the government and unions share a concern for inflation. It uses a game theoretic model of this interaction, in which the government plays an economy-wide union. Though simple, this nests several other models as special cases. In that corresponding to Gylfason and Lindbeck's model, the factors which they identify are shown to be sufficient for stagflationary bias, in a specified sense. However, for the union to care about inflation is not a necessary condition. The main result of the paper concerns the more general model. It establishes a set of necessary and sufficient conditions for stagflationary bias, as previously defined. These conditions do not include a shared concern for inflation. The paper comments briefly on the significance of this result for stagflation and economic modelling.

The paper shows that the “Frey–Schneider–Schultz hypothesis” – that there is a negative relation between the government's popularity and the government's incentives to engineer political business cycles – is consistent with rational, forward-looking voting provided one makes appropriate assumptions about the incumbent's preferences. The empirical part of the paper presents evidence favourable to the hypothesis using quarterly data on US money growth.

This paper develops a model of discrete choice to analyse the choice of voters among a number of political parties. It then applies the model to an empirical analysis of the relationship between a government's economic performance and its political popularity for the Republic of Ireland over the period 1974–1987. Within this general statement the paper makes three contributions. First, it sheds light on a hitherto unknown phenomenon — namely the nature of the relation between economic performance and political popularity in Ireland. Second, it does this within the context of analysing the reactions of different types of voters viz. voters of all social classes and then of social classes ABC1 and C2DE. Third, the empirical work is grounded firmly in a choice theoretic model involving optimal choices between discrete alternatives.

In 2008, as the financial crisis unfolded in the United States, the banking industry elevated its lobbying and campaign spending activities. By the end of 2008, and during 2009, the biggest political spenders, on average, received the largest bailout packages. Is that relationship causal? In this paper, I examine the effect of political connections on the allocation of funds from the Troubled Asset Relief Program (TARP) to the US financial services industry during the 2008–2009 financial crisis. I find that TARP recipients that lobbied the government, donated to political campaigns, or whose top executives had direct connections to politics received better bailout deals. I estimate regression discontinuity design and instrumental variable models to uncover how election outcomes for politicians in close races affected the distribution of bailout funds for connected firms. The results do not imply that some banks were deliberately favored over others, just that favored banks benefited because of their proximity to the right people in power. If being politically connected matters in general, in times of crisis it matters even more. Supplementary Information The online version contains supplementary material available at 10.1007/s11127-020-00871-w.

While it has been argued that the cyclicality of government spending likely depends on the intensities of political pressure to increase expenditure, in economic upturns and downturns, it is important to explore the determinants of changes in the strengths of those pressures. This paper is the first (to our knowledge) to focus on the relevance of systematic changes in voter awareness of government spending. Predictions of the impact of changes in awareness are tested with reference to 23 OECD donor countries’ foreign aid expenditures over the 1999–2015 period. The evidence offers insights into the discretion governments exercise when “fiscal illusion” increases and into the policy implications of systematic changes in voter awareness (in “good” times and in “bad”).

The purpose of this paper is to formally examine the effect of placing constraints, such as the line-item veto or a balanced budget amendment, on legislative behavior. There are two basic findings that emerge from the analysis. First, constraints on one type of instrument, such as spending, will in general result in more widespread use of other kinds of instruments, such as regulation. Second, it is naive to conclude that constraints on legislative behavior will promote economic efficiency and/or reduce the growth of government. The primary contribution of the paper is to suggest how changes in the political environment can affect instrument choice, economic welfare, and the size of government.

This paper reviews the rationales expressed by businessmen for corporate philanthropy as an alternative to both individual charity and government provision of some types of charitable services. Three hypotheses explaining the aggregate level of corporate giving are then tested. The paper concludes with a list of potential hypotheses to be tested about corporate philanthropy when the data become available.

voter is made indifferent with respect to the fiscal packages offered by the two types of democratic government. The empirical results in the paper find a significantly lower price of land in communities with a representative democratic form of local government, ceteris paribus, suggesting that this type of government provides a relatively undesirable or inefficient fiscal package.' This paper extends my earlier study on government structure by examining whether any expenditures differences exist across the two types of local government. The earlier study fails to identify the source of the inefficiency. Both municipal and school expenditure differences are studied for a sample of 90 jurisdictions in Connecticut with two different government forms, the opentown meeting and representative government.2

The theory of second best, as originally conceived by Meade (1955) and popularized by Lipsey and Lancaster (1956), has been a much discussed topic for quite some time now. Second best rules have been devised for a number of situations, but very little has been done in terms of trying to get a feel for the magnitudes that may be involved. This paper intends to make a crude and tentative first step in this direction in the interest of making a similarly crude and tentative evaluation of the policy measures that the theory of second best might suggest. The second best problem that we will examine is the one analyzed by Rees (1968), Bergson (1972), and others where there is a government operated industry in an economy containing an untouchable monopoly. The one generally agreed upon implication of second best theory is that where there is an optimality condition that can't be achieved, then the desirability of achieving the remaining conditions is cast in doubt. Thus, in the case of an untouchable monopoly, the desirability of pricing at marginal cost in the government operated industry is cast in doubt and a second best pricing rule for this industry is desired. There are probably two reasons that the second best literature does not give much feel for magnitudes. The first is that most of the literature has been exclusively devoted to finding necessary conditions for second best optimality and necessary conditions in and of themselves indicate nothing about magnitudes. The second reason, as far as the well-informed layman and wellmotivated undergraduate are concerned, is that much of the literature is couched in ad hoc assumptions that don't readily lend themselves to intuitive interpretations. Accordingly, this paper is going to deal only with solutions rather than conditions, and to pose the problem in terms that would be intuitive to anyone interested in this type of question. Specifically, we will give a numerical example of second best pricing and discuss its implications. Although this approach is sadly lacking in generality, it may be useful in illustrating one possibility and will be accessible to any layman who is willing to skip the equations and trust the computational skills of the author.

The amount of control the general public exerts over government depends on accepted government procedures as determined by the political constitution and prevailing public opinion. It has not been the purpose of this paper to suggest ways of providing the public more control over government but to consider some implications of changes in that control. It is obvious that it would be desirable for the general public to have more control over political decisions; i.e., for the political process to be more responsive to the broad based benefits and costs that result from government action. The question is; what does more public control over government imply about the desirable size of government? For the natural rights advocate the answer is nothing. Government should be only large enough to protect citizens against force and fraud. The purpose of the present paper, however, has been to argue that the desirable size of government can be either positively or negatively related to the control exerted over it by the public. If this argument is accepted, it casts doubt on the possibility of a desirable minimum state. When there is little public control over government, organized special interest will have disproportionate political influence and will use this influence to expand government into activities that are detrimental to the public interest. Obviously, given this situation, it will be desirable to use additional public control over government to reduce the size of government by restricting its activities. But just as obvious is that this situation is one in which control over government is inadequate to the task of achieving a minimal state. On the other hand, whether or not control over government is sufficient to limit the size of government to its desirable level, there remains a plausible argument that this desirable level eventually begins to increase as control over government increases. It is certainly reasonable to expect that if control over government continued to increase toward that of complete control, the desirable size of government would eventually become greater than the minimum achievable state (and greater yet than the minimal state). One can doubt whether public control over government sufficient to reduce the state below desirable limits will ever be reached. It may be that the lack of control over government explains why the ideal of a minimal state is such a persistent one. The minimal state may be a fantasy that, like most fantasies, owes its appeal to the fact that it is beyond our reach.

For a volume or conference on political economy, we might note that Professor Arnold's paper does not explicitly employ the theories of political economy. It is not developed upon a public choice model. There is no rationality model exposed, developed, or tested. Nor is it on one of the grand topics of political economy, such as class. Further, there is no mountain of data for us to chew upon, so as to better digest our theoretical ideas. Rather, it is representative of informal work done by political scientists which is relevant to the tasks of political economists. Indeed, Professor Arnold's work raises substantial questions for us. The paper fits within our substantive concerns regarding equilibria in the cyclic logrolling processes (Bernholz, 1978; Oppenheimer, 1979; Fiorina, 1978; Shepsle, 1978; Weingast, 1978). Professor Arnold's work is an extension of the logrolling, pork barrel subject which has fascinated so many of us. His characterization of the politician as election oriented is consistent with that of most formal models. Finally, there is a persistent concern with inefficiency and suboptimality that appeals to us. With this in mind, let us consider his paper. As he promises, his paper "explore[s] how the federal government makes decisions about the geographical allocation of expenditures" (p. 107). 1 Professor Arnold does not treat the entire subject, but rather focuses on particular aspects of the government's decisions regarding geographical distribution of largesse. He hones in on: (1) the methods by which these decisions may be made; (2) the political repercussions of these decisions; and (3) (his-real subject) the hypothesis that the amount (or severity) of the political consequences are a function of the decision method employed and the substantive nature of the program. Professor Arnold is ovenmpressed w~th the subject's tmportance: "With the federal government spending nearly a quarter of national output, one cannot ignore the differential geographic effects of that spending, any more than one couldignore its differentialeffects by income or race." (p. 107) But, certainly,with geographical, rather than racial mobility of individuals in the economy, differential racial allocations are not easily overcome, yet many people can switch residences from one area to another. Thus, it is at least not self-evident that the moral qualifies of the questions have equal claim. But the subject clearly has interest to us both on its own and as it informs us regarding governmental behavior in general for theoretical purposes.

In recent years government budgets in the U.S. have grown at unprecendented rates, particularly at the state and local levels. Perhaps provoked by this spending record, and by the overwhelming approval of California's Proposition 13 (a limit of property tax rates), several states have adopted tax/ spending limits. Activities are proceeding in many other states, and even at the federal level, which would lead to some form of budgetary control. These amendments vary in terms of scope and interest, but their essential purpose is to give voters the right to determine the upper limits to the size of government budgets. Supporters of tax limitation amendments (TLAs) maintain that voter preferences are not accurately reflected in the actual decision-making process. Recent theoretical and empirical work on the economics of state and federal bureaucracy generally support the advocates' characterization [1, 7, 8]. These studies indicate that because of the institutional structure surrounding government decision-making, bureaucratic production tends to result in a level of government goods expenditure exceeding the desired level. A TLA is designed to solve this problem, or so supporters contend, by imposing a ceiling on the spending level. In this paper, we analytically address this intuitively plausible contention. Given the premise that bureaus are monopoly suppliers, a primary purpose of this paper is to outline those circumstances where a TLA will, and will not, make taxpayers better off.1 The effect of a TLA on voter welfare is largely a function of the bureaus' response to the budget ceiling. Of course, the arguments in the bureaucrats' utility function will help shape the bureaus' reaction. Over the last decade, bureaucracy theory has advanced in the direction of explicitly applying traditional utility maximization principles to bureaucratic behavior. William Niskanen's early work posited that bureaucrats simply attempt to maximize the size of their budgets [6]. Noting that this approach unduly delimits the range of utility-maximizing activities, Jean-Luc Migue and Gerard Belanger

Most analyses of preferences for government-supplied goods disregard the fact that in a democratic society, these preferences are revealed by an individual choice: the vote. In this paper this is taken account of in a model, explaining the dynamics in voting behavior in a multi-party system. The model assumes that voters may be categorized into K groups of individuals, pursuing the same interests, who remember how parties do in representing these interests (given the level to which they are held responsible for government policy). The model allows one to estimate party identification, sensitiveness to economic performances, time preference, and relative preferences for public versus private goods, all for each of the groups. Furthermore, the model allows for an estimation of the level to which various parties are held responsible for government policies. An empirical application of the model to the Netherlands is presented, albeit that data restrictions did not allow a distinction of more than one group. The results in terms of significance of the coefficients as well as the interpretation of the original parameters are promising. The two main conclusions are that the relative preference for private versus collective consumption is lower than the existing ratio in the Netherlands, and that two parties forming a government coalition are not held equally responsible for the policies. Financial support from the Netherlands Organization for the Advancement of Pure Research is gratefully acknowledged. Previous drafts of this paper were presented at the following congresses: The European Consortium for Political Research (Amsterdam, 10–15 April 1987); the Meeting of the European Public Choice Society (Reggio Calabria, 22–25 April 1987), and the Econometric Society European Meeting (Copenhagen, 24–28 August 1987). The participants in these sessions, as well as the participants in the seminar of the Sociological Institute of the University of Milan are gratefully acknowledged for their useful suggestions. Special thanks are due to Nathaniel Beck and Friedrich Schneider for carefully reading the manuscript and presenting helpful comments.

The paper considers ‘trust’ as an empirical determinant of individual support for government intervention. The central notion is that the influence of generalized trust on policy attitudes is conditional on confidence in both state actors and major companies. The starting point is the idea that individuals who generally distrust other persons have a stronger taste for the regulation of economic activities, while people with high interpersonal trust are in favor of less stringent regulatory control. Yet, people who do not trust unknown others also tend to mistrust government and private companies. If mistrust in state actors dominates, we should not necessarily expect stronger interventionist preferences. Estimating the determinants of interventionist attitudes using data from the World Values Survey/European Values Study for approximately 130,000 individuals in forty OECD- and EU-countries, we find evidence that the impact of social trust on government intervention attitudes is conditional on institutional trust. Confidence in major companies appears to have a stronger effect on preference formation than trust in state actors.

This paper addresses two empirical questions. Is fiscal policy affected by upcoming elections? If so, do election-motivated fiscal policies enhance the probability of re-election of the incumbent? Employing data for 65 democratic countries over 1975-2005 in a semi-pooled panel model, we find that in most countries fiscal policy is hardly affected by elections. The countries for which we find a significant political budget cycle are very diverse. They include 'young' democracies but also 'established' democracies. In countries with a political budget cycle, election-motivated fiscal policies have a significant positive (but fairly small) effect on the electoral support for the political parties in government.

Brilliant but little known, in part because his style was dense and crucial papers unpublished, Earl Thompson reformulated standard theory to achieve policy relevance, focusing on significant rent-seeking inefficiencies stemming from private information and transaction costs. Drawing on history, he showed a vast array of institutions to be efficient which economists had previously found to be inefficient, modeled governments and their nature, defined government’s functions, and showed why dominant states rise and fall.

Previous scholarship has shown that Tax and Expenditure Limits (TELs) often fail to constrain government growth. This paper views the implementation of TELs as a principal-agent problem. Agency theory predicts that delegation is affected by the preferences of agents and the costs of monitoring those agents. Using panel data for the US states from 1970 through 2008, I conduct an empirical test of the validity of the principal-agent model for TELs. I find that state spending limitations are only effective at cutting the growth of state and local spending under the direction of agents who have a preference for limited government. Additionally, state property tax limitations are only effective when monitoring does not require costly coordinated action. These findings contradict an alternative theory of TEL implementation that looks towards the policy’s origin. My research suggests that the arrangements of delegation determine when and under what conditions TELs effectively reduce government growth.

Under which conditions do vote-seeking governments pursue reforms in welfare programs that are unpopular among the median voter and that, consequently, likely lead to a loss of votes? This paper proposes reforms may result from a commitment problem of voters between elections. Due to economic voting voters cannot credibly commit to re-elect a non-reforming government during a recession. This study uses a game-theoretical model to investigate what happens when the median voter in a multi-period election game can no longer condition re-election perfectly on the actions of the incumbent government. The model shows that multiple equilibria may emerge, including one with the incumbent government reforming during bad economic circumstances and not reforming during good times. The voter commitment mechanism can hereby rationalize the theoretically puzzling empirical phenomenon that governments reform welfare programs amidst reform-averse voters. Our theoretical prediction that they do under economic lows is in line with existing empirical work.

How do drug trafficking organizations organize? Drug trafficking organizations continue to operate effectively despite incentives for members to defect, pressure from damaged communities, and government interdiction efforts. This paper identifies the problem of defection in this context and applies insights from the literatures on club goods and extralegal governance institutions to explain the puzzling organization and activities of one of Mexico’s most dangerous drug trafficking organizations, La Familia Michoacana. The group uses a reward and punishment scheme to prevent defection from members and to elicit cooperation from the community and government.

Several recent studies suggest that transfers from central to regional governments are motivated by political considerations. In this paper we examine if this is also the case for transfers from regional to central governments in the context of the German fiscal equalization system. We examine the factors that contribute to differences in tax revenues across German states. The evidence indicates that both fiscal incentives and political factors can explain these differences, although in Germany the former are more important. Moreover, accounting for fiscal institutions has important consequences for the empirical assessment of political influences on taxation. Overall we find that the political affiliation of the state governor is an important factor in explaining differences in state tax revenues. Thus, the right-wing party (CDU/CSU) is effective in relaxing the tax burden at the state level. In contrast, partisan alignment between the state government and the federal government loses its importance once fiscal conditions enter the empirical model.

The existing literature has shown that special interest groups can have both growth enhancing and growth retarding effects on an economy. In either case, it is always assumed that the nature of the special interest groups remains constant over time. The hypothesis of this paper is that a dynamic relationship exists between politicians and lobbyists, i.e., that opportunities for rent extraction for special interest groups can evolve over time. In the short run politicians may support “projects” proposed to them by lobbies, because they yield clear economic benefits. However, continued governmental support may imply a cost to society and yield rents to the lobbies. A theoretical framework in which established and new lobbies overlap is developed to model a government’s incentives to behave in a manner consistent with the hypothesis. In this framework, voters can still rationally reelect politicians even if the latter support lobbies for an inefficiently long period of time, because if they did not, then the quality of the pool of new projects would deteriorate.

The empirical link between the post-WWII expansion of international market integration and the growth of national public expenditure has been widely noted, with no consensus as yet regarding the interpretation of this correlation. We posit that a likely link between increased openness and public spending is the use of the latter to offset changes in the distribution of income that result from increased openness. To explore this potential link, we study time series data from Spain in 1960–2000, a period of major changes in political organization as well as in both fiscal and trade policy. We find evidence that democracy reinforced the causal relation from increased openness to greater public expenditure. Thus, the paper contributes to the literature that emphasizes that changes in political regimes are potentially important determinants of the observed international patterns of openness and government size.

This paper provides a theory of earmarking based on the relative power of a legislature and executive. The politically powerful use earmarking as a means of resolving uncertainty and insulating preferred policy from the reach of future government. Tax revenue will be earmarked more often when political power is unified under one party or when a party has the legislative majority needed to overturn a gubernatorial veto. An empirical test of the theoretical predictions are conducted using a panel of data for US states. A state with a legislature controlled by a single party with a large enough majority to overturn a gubernatorial veto will earmark 5% more of its tax revenue than other states and a state with a unified government will earmark 6.5% more. Together these explain 18.5% of the observed decrease in the percentage of state tax revenues earmarked from 1954 to 1997.

This is the author’s final, accepted and refereed manuscript to the article. The final publication is available at www.springerlink.com Existing theory on the form of government suggests that a parliamentary system promotes a larger size of government than does a presidential system. This paper extends the existing theory by allowing for distortionary taxation. A main result is that if taxation is sufficiently distortionary, the parliamentary system may promote a smaller size of government than the presidential system. The proposed mechanism appears consistent with several empirical patterns in the data that cannot be explained by other theories.

This paper investigates the impact of elections on the level and composition of fiscal instruments using a sample of 19 high-income OECD democracies during the period 1972–1999. We find that elections shift public spending towards current expenditures at the cost of public investment. Although we find no evidence for an electoral cycle for government deficit and overall expenditures, we find a negative effect of elections on revenue attributed to a fall in direct taxation. Our results apply for predetermined electoral periods while endogenous elections seem to increase deficit and leave the composition of fiscal policy unaffected.

This paper investigates the determinants of government size at the provincial level in China. We employ the panel data model as a platform for empirical analysis and control for endogeneity in the study. Our study shows that openness to trade and foreign direct investment (FDI) may curtail government expansion, and that the provincial-level public sector is characterized by economies of scale. This study also documents that Wagner’s law does not hold true for China. Moreover, both expenditure decentralization and revenue decentralization contribute to the expansion of China’s government.

Traditional economic theory suggests that competition among officials providing government goods tends to reduce corruption. However, empirical evidence does not yet support this view. In this paper, I show that a corrupt and powerful central authority can use competition among officials to amass resources for itself. While competition reduces corruption at the lower level of government, corruption at the higher level of government is increased. To avoid widespread theft from the central authority, competing officials are monitored more intensively than a monopolist. Hence, even though competition among officials generates more consumer surplus, it may reduce welfare.

This paper uses U.S. city-level data on five public expenditure categories to test empirically whether the form of local government affects the amount of public good provision. This also serves as an empirical test of a theory of national politics that predicts higher provision of public good in parliamentary than in presidential regimes. The robust results indicate that: at the city level, the mayor-council form of government provides significantly more public good than the council-manager form of government for two of the public expenditure categories; and, at the national level, presidential regimes provide more public good than do parliamentary regimes.