Article: Fiscal policy, legislature size, and political parties: evidence from state and local governments in the first half of the 20th century.

INTRODUCTION

Institutions--the rules by which decisions are made--have a material affect on government tax and spending policies. That is the consensus view from an emerging empirical literature in public finance. A great deal of evidence has come from the "natural laboratory" of U.S. state and local governments. Studies have taken advantage of the cross-sectional variation in institutional arrangements to document the importance of tax and expenditure limits (Poterba, 1994), budgeting rules (Bohn and Inman, 1996; Poterba, 1994, 1995; Crain and Crain, 1998), legislative structure (Crain and Muris, 1995; Gilligan and Matsusaka, 1995), executive veto (Holtz-Eakin, ...

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