Political Parties and the Tax Level in the American states: Two Regression Discontinuity Designs

Leandro De Magalhães and Lucas Ferrero ()

Bristol Economics Discussion Papers from School of Economics, University of Bristol, UK

Abstract: Do parties matter? Yes, but not in the usual way we tend to think of them: big government Democrats and small government Republicans. Our first regression discontinuity design shows that whether the majority in the House of Representatives is Republican or Democratic does not affect the tax level. This surprising result goes against the recent literature in political economy. We then perform another regression discontinuity design in which we find that whether a government is aligned (both the Governor and the majority in the state House belong to the same party) or divided (they belong to different parties) does have an effect on the tax level. Taxes are higher when the government is aligned.

Keywords: Regression discontinuity design; Democrats; Republicans; divided government; line item veto; tax level. (search for similar items in EconPapers)
JEL-codes: H00 H11 H20 H30 H71 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2010-09
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Persistent link: https://EconPapers.repec.org/RePEc:bri:uobdis:10/614

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