1995/08/01 by Timothy Besley, T. Besley, Anne Case +1
Economics, Econometrics and Finance · #Fiscal Policy and Economic Growth #Fiscal Policies and Political Economy #Economic Policies and Impacts
paper · doi:10.2307/2946699
This paper analyzes the behavior of U. S. governors from 1950 to 1986 to investigate a reputation-building model of political behavior. We argue that differences in the behavior of governors who face a binding term limit and those who are able to run again provides a source of variation in discount rates that can be used to test a political agency model. We find evidence that taxes, spending, and other policy instruments respond to a binding term limit if a Democrat is in office. The result is a fiscal cycle in term-limit states, which lowers state income when the term limit binds.