Government Spending, Shocks, and the Role of Legislature Size: Evidence from the American States*

Abstract

Objective I examine the relationship between legislature size and several components of government spending using a methodology that allows me to estimate how legislature size influences the fiscal response to shocks that are common to all states. Method I use nonlinear least squares on a panel of 48 of the 50 American states over the period 1978–2008. Results I find little evidence that states with larger than average lower or upper chambers experience a larger change in spending per capita in the presence of a shock. I do find a positive relationship between lower chamber size and the first difference of welfare spending per capita, but this increase is partially offset by a negative relationship between upper chamber size and welfare spending. Conclusion These results are consistent with the interest groups theory of government, which states that larger legislatures can be associated with lobbying and bargaining costs that may have offsetting effects.

The Law of 1/n Revisited: Distributive Politics, Legislature Size, and the Costs of Collective Action

“…Fiorino and Ricciuti (2007) offer empirical evidence in this vein, finding a positive relationship between legislature size and government spending for Italian regional governments. Hankins (2015) tests the effects of legislature size on state spending, particularly in response to shocks, and finds little evidence of a positive relationship-a result which is interpreted as supporting the idea that larger legislatures face higher costs associated with interest groups and lobbying. Foundational work by Weingast and Marshall (1988) argues that institutions within the legislature are developed to facilitate gains from trade among legislators.…”