Formal and informal constraints on state government and economic freedom

Peter Calcagno and Joshua Hall

Economics Bulletin, 2020, vol. 40, issue 1, 801-806

Abstract: Both formal and informal institutions can limit collective action. In the US context, there is a large literature on formal and informal institutions at the state level. The focus of this literature has generally been on whether these institutions constrain fiscal policy. Fiscal constraints on government activity are consistent with economic freedom, although economic freedom is a much broader concept. There is also a growing literature on the determinants of economic freedom. In this paper, we use data from 1983-2013 to quantify the extent to which formal and informal institutions can help explain the level of economic freedom across states. Our findings indicate that divided government and ideology can both constrain fiscal policy.

Keywords: Economic Freedom; State Fiscal Policy; Formal Constraints; Informal Constraints; Budget Constraints (search for similar items in EconPapers)
JEL-codes: H7 P4 (search for similar items in EconPapers)
Date: 2020-03-25
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