Legislative Turnover, Fiscal Policy, and Economic Growth: Evidence From U.S. State Legislatures

Abstract

An examination of how increased turnover among legislators in the fifty U.S. states affects fiscal policy and economic growth finds that it makes legislators short-sighted. Turnover increases the size of government by increasing the shares of both total spending and taxes in income. In particular, turnover increases capital expenditure and income taxes, both of which may cause long-run distortions in the economy. Further, increased turnover, by resulting in inefficient fiscal policy, reduces long-term economic growth.

Legislative Term Limits and Government Spending: Theory and Evidence from the United States

“…Our findings are consistent with Erler's (2007) and Uppal and Glazer's (2015) findings, yet our model now explains why the adoption of strict term limits increases government spending, while the adoption of moderate term limits has no such effect. We show formally that the relationship between term limits and the amount of government spending depends crucially on the distribution of seniority in a legislature.…”

“…We show theoretically and empirically that term limits are another institutional determinant of the electoral and legislative process, ultimately affecting economic policies. In consistent with previous studies that show that government spending always expands as a result of term limits (Alt, de Mesquita, and Rose 2011;Besley and Case 1995;Erler 2007;Uppal and Glazer 2015), we demonstrate that the impact of legislative term limits is positive, but the effect depends on the types of term limits to be implemented. Substantively, our findings offer an important implication for states and nations that are considering adopting term limits.…”

“…Erler (2007) shows that the amount of total government spending increases after legislative term limits are introduced. Similarly, Uppal and Glazer (2015) find that the adoption of term limits increases the amount of spending for capital-intensive projects (e. g. constructing a rail line). Further, Keele, Malhotra, and McCubbins (2013) find little evidence that term limits affect state government spending by applying a case-synthetic method.…”

State Taxes and Legislative Turnover in the United States

“…Indeed, Keele, Malhorta, and McCubbins () find evidence suggesting that legislative term limits might have had only a transient, if any, effect on state spending. On the other hand, Uppal and Glazer () find that legislative turnover does appear to make state fiscal policy more short‐sighted. Specifically, they find that higher turnover increases overall spending and taxation in total dollar amounts and as a share of GDP, leading to slower economic growth.…”

“…This is consistent with the finding that incumbents who face high turnover rates may be more inclined to adopt policies that would have little chance of passing through subsequent governments (Alesina and Tabellini ). Many of these policies may favor the sectors and industries to which these incumbents expect to return, potentially leading to a misallocation of scarce public resources and greater overall government spending with detrimental consequences for future economic growth (Uppal and Glazer ).…”