U.S. State Government Economic and Social Performance: Unified vs. Divided and Democrat vs. Republican Controlled State Governments.

AuthorSieber, Soo

In the fifty political entities that are the American states, politicians from the two primary parties--the Democratic Party and the Republican Party (1)--compete for the right to represent voters as either governor or legislators. In almost all states, the elections for governor are conducted every four years, (2) presenting voters with an opportunity to choose between alternative ideologies, familiar to many from federal-level politics. Sarah Morehouse suggests that the political party is the most important institution in state politics. (3) Richard Winters agrees, noting "We define our candidates in party terms and our issues in party terms." (4) The party is an organization that endures and is known for its ideology. Candidates for elected government positions represent their party ideology, while sometimes adding their own flavor to it, but always while being defined as a "Democratic" or "Republican." This research paper aims to shed light on the effect of voters' choices on the well-being of their state. The questions explored are "if and to what extent the economic and social well-being of the states are affected by the political structure," i.e. the different effects of a unified or divided government, and the different repercussions of having different parties in control of the state government. Philip Jones and John Hudson suggest that the economic advantage of political parties is to "... reduce the "transaction costs" of electoral participation. Political parties provide a low-cost signal of the candidates' policies and personal characteristics and in this way, reduce voters' information costs." (5)

William Keech suggests that the differences between the ideologies of the parties have an effect on macroeconomic policies of state government. (6) He agrees with Douglas Hibbs and Edward Tufte that Democrats place higher priority on low unemployment, whereas Republicans place higher priority on lower inflation. (7) Also, empirical studies show that Democratic state governments spend more on welfare, enact higher minimum wage, and promote less inequality. (8) William Franko, Caroline Tolbert, and Christopher Witko report a significant difference in voters' concerns relating to the two parities' policies which influence the degree of inequality differently. (9) It is possible for one party to win the two branches, i.e. executive and legislative, creating a unified government. Alternatively, it is also possible that each party gets the majority of the vote for only one branch. In this case the government is considered a divided government.

Political scientists disagree about the positives and negatives of a divided versus unified government. Christian John sums up the three reasons why a divided government is not good for the U.S. at the federal level. "Divided government leads an unjustifiable weakness in government brought about by a lack of accountability, it produces legislative 'gridlock,' and it contributes to a diminution of the expression of popular will." (10) Will McLennan presents the arguments in favor of a divided government at the federal level. "On the flip side one can argue that a divided government limits the size and the scope of government and fosters healthy competition between presidents and Congress that produces quality legislation." (11) Nicholas Mcintyre, Sarah Binder, and David Mayhew debate the success rates of unified versus divided government in their papers, based on the success rates of passing legislation at the federal government level. They come to the conclusion that the amount of passing legislations between the unified and the divided government are very similar. (12)

This paper evaluates the success of government based on their record of improving the state economy and increasing social well-being. This empirical analysis compares the degree of improvements achieved by unified and divided government, as well whether the Republicans or Democrats control the unified government. The comparison of the degree of effectiveness of a unified versus a divided government is the subject of several studies. For example, Kevin Leyden and Stephen Borrelli assert, "... after the election a unified government is better able to enact its programs." (13) James Alt and Robert Lowry agree, concluding that "... a divided government is less able to react to revenue shocks, which in turn leads to budget deficits particularly where different parties control each chamber of legislation and a unified party government... have a sharper reaction to negative revenue shocks." (14) Hence unified party legislators can pass programs that the executive branch is capable of implementing with minimum friction and need to compromise. However, the downside of a unified government is complacency, since they have absolute power. McLennan even suggests that a divided government might be more effective due to the competition between parties and the need to compromise. (15)

This empirical analysis suggests that a unified government rate of growth is not significantly different from a divided government, for most of the variables used to measure economic performance. In one variable, personal income per capita (PIC), the unified government is even inferior to that of a divided government. With respect to the social variables, the results are mixed. This study suggests that a unified government under the control of the Democratic Party lowers unemployment, poverty, and crime rates as compared to unified governments headed by the Republican Party. This paper is divided into three sections. The first section shall provide definitions of the variables, the sample data, the period covered by this study, and the statistical model. The next section contains the regression results of our model as well as our analysis of the results. The last section includes the summary and the conclusions.

Empirical Analysis Data, Variables, and Models

Panel data from forty-seven of the contiguous American states of cross-sectional observations and twenty-five years of time series observations ranging from 1990 to 2014 (with the state of Nebraska (16) excluded) is the source of this study's empirical data. With twenty-five years of annual observations and forty-seven cross-section observations, the model consists of a total sample size of 1,175 observations for each variable. (17) The empirical analysis models have two sets of dependent variables; state economic variables and social well-being variables. Personal Income per Capita (PIC) is used as a proxy for state economic growth and is used in a per capita term rather than an aggregate term to accommodate population size. In addition, the percentage of employed workers among state's non-institutionalized population (EMP) and the percentage of people unemployed among the labor force (UNEMP) are dependent variables since job creation and unemployment are major macroeconomic issues and are widely discussed during national and state election campaigns. It is interesting to note that Soledad Prillaman and Kenneth Meier--who study the effect of taxes and incentives on the growth of state economies--also used the following seven variables as proxy for economic growth: growth rate of real gross state product, change in employment rate, change in net job creation rate, growth rate of per capita personal income, change in poverty rate, change in the rate of entering business establishments, and change in the rate of exiting business establishments. (18)

Policies pertaining to education and training, housing subsidy, exemptions of necessities from being subject to sales taxes, personal exemptions from income tax, health care, and others are aimed specifically to lower poverty rate and to reduce income disparity. In addition, state governments are involved in policies to prevent crime and make the state a safer place for its residents and businesses. To evaluate the success of the state government policies in social well-being, the empirical analyses include state poverty rates, state inequality degree as measured by Gini coefficients, and the state crime rates as dependent variables. Poverty rate (POV) is defined as the percentage of the state population with an income below the poverty line and crime rate (CR) is defined as the number of offenses per 100,000 people. The model used states Gini coefficients from U.S. State-Level income inequality data by Mark Frank, which constructed the coefficient from individual tax filing data from the Internal Revenue Service and reported the constriction method in his papers. (19)

As explanatory variables, the model used several political variables that reflect the voters' election choices for the state government, i.e. governor and the two chambers of legislature. The candidates for elected state positions, i.e. governors, senators, and members of the House, were identified by their party affiliation. The two parties that almost all winning candidates were affiliated with are the Democratic Party and the Republican Party. (20) The empirical analyses use four political variables: unified government, Democratic Party control of a unified government, Republican Party control of a unified government, and political competition. Those four political variables are similar to the work of Diane Rogers and John Rogers, Sarah Morehouse, Steven Levitt and James Poterba, and Timothy Besley, Torsten Persson, and Daniel Sturm but differ by the construction of the competition and the unified government variables. (21) The unified government, abbreviated in this paper as UNIGOVT, is defined as the condition where the state governorship and at least 50 percent of the members in each of the two Houses of Congress belong to the same political party, either Democratic or Republican. A unified government is a dummy variable with a value one for a unified government and zero for a divided government.

A unified government headed by the Democratic Party will be...

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