Persistence in government spending fluctuations: New evidence on the displacement effect

In spite of Peacock and Wiseman's 1961 NBER study demonstrating the “displacement effect”, simplistic theoretical and empirical distinctions between temporary and permanent spending are common. In this paper, impulse response functions from ARMA models as well as Cochrane's non-parametric method support Peacock and Wiseman's conclusion by showing 1) government spending in the aggregate displays strong persistence to temporary shocks, 2) simple decomposition methods intended to yield a “temporary” spending series have a weak statitistical foundation, and 3) persistence in spending has increased during this century. Also, as a basic “fact” of government spending behavior, the displacement effect lends support to interest group and bureaucracy models of government spending growth.     

Why bother campaigning? Campaign effectiveness in the 2009 European Parliament elections

This paper explores the effectiveness of European Parliament candidates' campaigns. We analyze the relationship between candidates' spending and their likelihood of success, controlling for a range of relevant co-varying factors. We then investigate whether the effects of electoral spending are conditioned by two variables: ballot design and incumbency. We find that, ceteris paribus, spending was positively related to a candidate's likelihood of electoral success in the 2009 campaign, though this effect is small in scale. We also reveal that the electorally positive effects of spending are observable across both 'party-centered' and ‘candidate-centered’ ballot structures, and that there is some evidence that incumbent spending is less effective than challenger spending.     

Modeling spending preferences & public policy

Understanding preferences over government spending is important for understanding electoral behavior and many other aspects of the political world. Using data on relative preferences for more or less spending across different issue areas, we estimate the general spending preferences of individuals and congressional candidates along a left-right spending dimension. Our modeling approach also allows us to estimate the location of policies on this same dimension, permitting direct comparison of people's spending preferences with where they perceive policy to be. We find that public shows very low levels of polarization on spending preferences, even across characteristics like partisanship, ideology, or income level. The distribution of candidates' spending preferences shows much more sorting by party, but candidates are significantly less polarized than is contemporary voting in Congress.     

Was ``V' for Victory or Votes? A Public Choice Analysis of World War II Federal Spending

Several studies on the New Deal have found that politicalfactors played a significant role in determining 1930s federalspending. This suggests that federal spending was not capturedby special interest groups and self-interested politiciansrecently, but rather, that it has been affected by thesefactors since the ``era of big government'' began. We examinethe military emergency of the 1940s to determine whetherfederal spending during this crisis was similarly affected bypolitics.     

The Impacts of State Capital Management Programs on State Economic Performance

Although the normative literature advocates systematic capital management practices, empirical studies investigating the tangible benefits of these practices are rare. Based on previous findings that public investment affects economic growth, this study extends the model of government spending and economic growth to investigate the effect of systematic capital management programs on state economic performance. Using panel data from 1997 to 2004 and the Government Performance Project's data on state capital management practices, the empirical results indicate that highly systematic capital management programs positively alter the relationship between the state's capital spending levels and the state's economic growth rate.     

Using Panel Data to Determine the Effect of the Americans with Disabilities Act on Per‐Student Public Education Expenditures at the State Level

The purpose of the present study is to determine whether passage of the American with Disabilities Act (ADA) in 1990 resulted in a statistically significant increase in per‐student public education expenditures at the state level. Although numerous studies have estimated educational cost functions, no prior study has examined the impact of the ADA on per capita education spending. The results of the present study are consistent with anecdotal evidence in that enactment of the ADA has had a positive effect on per‐student educational expenditures; this result suggests that legislative mandates may lead to increased government spending. In addition to the ADA, several of the leading determinants of per‐student education spending include population density, per capita income, percentage of the state that is over the age of 65, percentage of state's residents who have a four‐year college degree, percentage of state's residents who are homeowners, and total student population.     

School Spending Profiles: A Framework to Enlighten Resource Allocation Decisions*

Despite improved fiscal accounting systems, many district leaders continue to struggle with how to report and use fiscal data for the purpose of strategic resource decisions. This paper proposes the creation and use of school spending profiles as a way to communicate more complete and comparable school spending information. The proposed school spending profile provides not only a complete picture of school expenditures reflecting real costs, but it also indicates spending relative to each school's mix of student needs. Data from Denver Public Schools (DPS) illustrate how profiles can provide dashboard indicators useful for district leadership. Key assumptions and implications are considered.     

Women's suffrage and the growth of the welfare state

In this paper we test the hypothesis that extensions of the voting franchise to include lower income people lead to growth in government, especially growth in redistribution expenditures. The empirical analysis takes advantage of the natural experiment provided by Switzerland's extension of the franchise to women in 1971. Women's suffrage represents an institutional change with potentially significant implications for the positioning of the decisive voter. For various reasons, the decisive voter is more likely to favor increases in governmental social welfare spending following the enfranchisement of women. Evidence indicates that this extension of voting rights increased Swiss social welfare spending by 28% and increased the overall size of the Swiss government.     

‘Spending Wisely: Principles for a Good Spending Review': The First Report of the Fabian Commission on Future Spending Choices

This article examines the work of the Fabian Society Commission on Future Spending Choices published in June 2013. The Commission is undoubtedly the most detailed and ambitious attempt by a centre‐left think‐tank to analyse the structure of UK public spending since Labour's 2010 defeat. The Commission makes an eloquent case for a strategic approach to UK public spending, filling the substantial void in thinking on the centre‐left since Labour's 2010 defeat. Inevitably, the proposals raise fundamental questions about the capacity of the British state and the constitutional framework of the UK political system to accommodate a long‐term, future‐orientated approach to public expenditure, which deserve to be properly aired and debated.     

Easy Money: Tax Exporting and State Support for Higher Education

There is a substantial literature that assesses the effects of tax‐exporting capacities on the tax structures and aggregate spending levels that state governments choose to implement, but no work exists that isolates the effects of state tax exporting on higher education spending. Using state‐level data for 1989, 1995, 2002, and 2007, we estimate for the median voter in each state the change in the marginal cost of higher education subsidization generated by tax exportation, and calculate the increased higher education spending that results. We consider three types of spending: state appropriations to public universities as well as need‐ and non‐need‐based aid awarded to in‐state students. We find that neither type of aid is responsive to the marginal cost, or tax price, faced by the median voter. However, the median voter's price elasticity of demand for state appropriations is statistically significant and negative. We find that the median voter's tax price is substantially reduced by the presence of prominent mining and tourism industries and by the federal deductibility offset available to firms. Thus, these tax‐exporting capacities exert upward pressure on voter demand for state appropriations to public universities.     

The relationship between congressional spending and tenure with an application to term limits

Whether term limits would increase or decrease federal spending depends on the reason for the causal relationship between tenure and spending. We investigate this subject by empirically studying congressional spending and tenure for all United States House and Senate members who entered Congress between the 94th and 102nd Congresses (1975–1992). As our measure of congressional spending we use the National Taxpayers Union's Congressional Spending Scores. Our study finds that a statistically significant relationship exists between congressional spending and tenure for some groups of congressmen. We then test three hypotheses relating tenure and spending. No single hypothesis is consistent with all of our empirical results. Nevertheless, the small sizes of the empirical effects estimated in this study suggest that term limits would have an inconsequential impact on the level of federal spending – at least via the “moral hazard” mechanisms described in this paper.     

Additional incumbent spending really can harm (at least some) incumbents: An analysis of vote share maximization

The literature on the effects of campaign expenditures on electoral outcomes implicitly suggests that incumbent spending cannot have a negative marginal impact on the incumbent's vote share. Indeed, that literature has spent a great deal of effort finding positive and significant effects of incumbent spending. This paper shows that there are circumstances under which theory predicts zero and even negative impacts of incumbent spending. Estimating equations derived from the theory provide strong support for the base model, though only weak support for the extensions which predict nonpositive marginal products for incumbents.     

Spending Preferences of Public Sector Officials: Survey Evidence from Finland

We examine the determinants that shape the spending preferences of public sector officials on several budgetary appropriations. Following Niskanen's budget‐maximizing theory, we test whether these officials prefer larger budgetary appropriations rather than less. We measure their preferences to increase their own bureau's appropriations and compare those against their preferences for other bureaus' appropriations. The empirical evidence is gathered via a mail survey targeting high‐level officials from different ministries in Finland. The analysis of the responses suggests that Niskanen's theory is in part supported.     

Parkinson's Law and the New Public Management? Contracting Determinants and Service‐Quality Consequences in Public Education

Why is contracting used more frequently under some circumstances than others? What is its impact on spending for core mission and on service quality? These questions are explored with data from more than 1,000 Texas school districts. The evidence for a recent three‐year period shows that contracting is negatively related to spending on school districts' central task and is not positively associated with district performance. Why, then, do districts contract? While several variables are associated with the degree of contracting, the most interesting is the relative size of a district's bureaucratic staff. Furthermore, the relationship between contracting and bureaucracy is reciprocal: Each is associated with subsequent growth in the other. The dynamic suggests an updated version of Parkinson's law. These findings indicate the need for researchers to probe the causes and consequences of contracting more thoroughly to help public managers assess this important option.     

Presidential campaign expenditures: Evidence on allocations and effects

This paper analyzes the impact of presidential campaign spending on election results. Analyses of expenditures and voting are often plagued by simultaneity between campaign spending and expected vote share. However, game-theoretic models of resource-allocation decisions made by a central actor (i.e., a presidential campaign) suggest that candidates will spend more in close races and in races likely to be pivotal. We provide empirical support for this theory; using Federal Communications Commission data from the 1972 presidential election, we find that expenditures were higher in states where the election was expected to be closer and in states likely to be pivotal. We use these two factors as instruments in a two-stage least squares model to estimate the effect of spending on votes. We find that, contrary to previous theory and research, presidential campaign spending significantly increases a candidate's vote share.     

Does social spending add substance to formal rights?

This article examines the effects of social spending on political participation and various forms of collective action conditioned on a state's level of respect for empowerment rights. It brings the language of rights to the more well-developed comparative study of voter turnout. I theorize that a state which spends more on social initiatives drives down economic and social barriers between individuals and the polls or participating in collective action. This increases the substantive use of rights guaranteed formally by the state. I find that spending helps most where rights are already respected. I also find that spending can negatively impact participatory democracy where these rights are less well established. Ultimately, I conclude that institutional strength has a greater effect on the substantive use of rights than social spending.     

The Displacement Effect in the Growth of Governments

We analyze the displacement effect within a multivariaterevenue-expenditure model of government growth, based on along historical dataset, for Italy. Our long-run analysisshows a permanent influence of domestic product on the growthof governments, supporting Wagner's law. The short-rundynamics are more complex and provide some evidence for thedisplacement effect, in terms of a lower resistance againsttax-financing of government spending in the post-war. Inaddition, government spending adjusts faster when deviationsfrom its equilibrium get larger.     

Influencing Public Opinion of Space Policy: Programmatic Effects Versus Education Effects

The public is generally supportive of space policy, but less supportive of spending for the National Aeronautics and Space Administration (NASA) compared to other government programs. Previous research has helped identify who is more likely to be supportive of NASA spending, but not why. This study seeks to understand the causal mechanisms that influence support for NASA. Using natural between-survey and induced within-survey experiments, this study attempts to identify factors influencing changes in public support for NASA spending. Short-term programmatic and related media effects appear to have no influence on public support for NASA spending. However, correcting information asymmetries in regard to NASA's budget appears to have a significant positive effect on public support for NASA spending. The findings speak to the importance of the public being well informed on policy issues in order to make a correct policy choice, and demonstrate that individual programmatic aspects may not be as important as overall agency direction.     

Crowd‐Out or Affordability? The Lifeline Expansion's Effect on Wireless Service Spending

Public subsidization of private goods often leads to crowd‐out, reducing private spending. This effect is intended for a policy such as the 2008 Lifeline phone subsidy expansion, which aimed to increase affordable access to services. I examine the effects of this policy on households’ self‐reported wireless phone service spending in the Consumer Expenditure Survey. Using state‐level variation in policy implementation and triple‐differences event study methods, I estimate that the expansion reduced households’ wireless service spending by more than 100 percent of subsidy payments. I document that the expansion led to a separate, competitive market for providers catering to low‐income households. Consequently, higher‐quality subsidized services crowded out lower‐quality unsubsidized options, saving households more than an equivalent cash transfer. This highlights how market segmentation and competition can magnify a targeted subsidy's impact.     

How federalism influences welfare spending: Belgium federalism reform through the perspective of the synthetic control method

The question of whether and how federalism influences a country's welfare state has been a longstanding concern of political scientists. However, no agreement exists on exactly how, and under what conditions, federal structures impact the welfare state. This article examines this controversy. It concludes theoretically that the specific constellation of federal structures and distribution of powers need to be considered when theorising the effects of federalism on the welfare state. Using the case of Belgium and applying the synthetic control method, it is shown in the article that without the federalism reform of 1993, the country would have had further decreases in social spending rather than a consolidation of this spending in the years after 1993. In the case of Belgium, the combination of increased subnational spending autonomy in a still national financing system provided ideal conditions for a positive federalism effect on social spending to occur.