How gubernatorial budgetary power and interest groups affect vertical fiscal imbalances in the US states: Focusing on fiscal centralization and decentralization

Abstract

This study empirically examines the roles of gubernatorial budgetary power and interest groups in vertical fiscal imbalances across US states via a two-step generalized method of moments estimation during a 22-year period . States' share of intergovernmental transfers and the local share of intergovernmental transfers are often affected by interaction between governors and interest groups, as are expenditure centralization and revenue/ expenditure centralization. Revenue decentralization and the local share of intergovernmental transfers are frequently influenced by cooperation between governors and interest groups via mutual support. Long-term cooperation and gridlock each influence expenditure centralization, revenue/ expenditure centralization, and revenue decentralization. Long-term cooperation is not statistically significant in terms of the state and local shares of intergovernmental transfers; that is, governors and interest groups cooperate in pursuit of short-term benefits rather than long-term results. Long-term political influence also has no impact, affirming a short-termoriented political viewpoint.