June 28, 2011

Pick Your Poison: Do Politicians Regulate When They Can't Spend?

  • Noel D. Johnson

    Senior Research Fellow
  • Matthew D. Mitchell

    Director of the Equity Initiative
  • Steven Yamarik

    Professor of Economics, California State University in Long Beach

In this paper, the authors investigate whether laws restricting fiscal policies across U.S. states lead politicians to regulate more instead. The authors first show that partisan policy outcomes do exist across U.S. states, with Republicans cutting taxes and spending and Democrats raising them. The authors then demonstrate that these partisan policy outcomes are moderated in states with no-carry restrictions on public deficits. Lastly, the authors test whether unified Republican or Democratic state governments regulate more when constrained by no-carry restrictions. This paper finds that no-carry laws restrict partisan fiscal outcomes but tend to lead to more-partisan regulatory outcomes.

View the PDF at MPRA