Academic journal article
By Mixon Jr., Franklin G.; Hobson, David L.
Contemporary Economic Policy , Vol. 19, No. 1
DAVID L. HOBSON [*]
The present study tests the theory that states can impact the size of the grants they receive (per capita) from the federal government by becoming pivotal players in the federal electoral (primary/caucus) process. That is, by rearranging their presidential primary and caucus dates, states can play an important role in determining the field of candidates for the two major political parties in the United States. States are then likely to be rewarded within the budgetary process at the federal level, which begins with the executive branch. Results from a simultaneous equation system suggest that the impact of the average movement of primaries/caucuses in the sample period (10.36 days closer to 1 January) results in an increase of federal grants of $362 million to $1.2 billion (over a two-year period) for the average state. These results are consistent with the current pattern in the American political process of more front-ended presidential primaries and caucuses. (JEL D72, H11, H72, H77)
The responsiveness of state and local government spending in the United States to changes in federal government grants to state/local governments has been the subject of extensive research in the economics literature. There have also been recent studies that examine the political aspects of intergovernmental grants within the legislative process. These studies have generally pointed out that (1) there is a positive relationship between spending by junior governments and the grants they receive from senior governments (i.e., the so-called flypaper effect), and (2) there are predictable legislative and interest group determinants of intergovernmental grants within the legislative process (see Gamkhar and Oates ; Wyckoff ; Yinger and Ladd ; Holsey ; Breton and Fraschini ; Wallis ; Grossman ). From a public finance perspective, some studies (see Ladd [1990 and 1991]) also examine the determinants of state aid to cities and localities, and others look at the impact of fed eral assistance on local services (Inman, 1988). Recently, Mixon and Ladner (1998) extended the intergovernmental grants research above by pointing out an ancillary consequence of the intergovernmental grant process by suggesting that the number of candidates seeking state legislative offices rises with the value of grants from the federal government. This study is built on the rent-seeking theory developed within the public choice literature by Tullock (1967), Krueger (1974), and Posner (1975). In this tradition, the present study proposes to test the theory that states can impact the size of the grants they receive (per capita) by becoming pivotal players in the federal electoral process. That is, by rearranging their presidential primary and caucus calendars, states can have a disproportionate impact on the process by which presidential candidates from the two major political parties are selected. By attempting to effect such a disproportionate impact, states are then likely to be rewarded within the budge tary process at the federal level, which in modem times has begun in the executive branch of government (i.e., the president and the administration). From this perspective, the current study extends a line of previous work by Wright (1974), Anderson and Tollison (1991), and Wallis (1991, 1998).
Below, we provide a brief review of recent studies on intergovernmental grants. Next we offer an econometric model of our hypothesis, followed by a discussion of the statistical results. Finally, we present some concluding comments.
II. PREVIOUS LITERATURE: A REVIEW
Many studies to date have suggested that a "flypaper effect" exists within the intergovernmental grant process, wherein state and local government expenditures increase as federal governmental grants to them increase. Recently, Gamkhar and Oates (1996) produced results, using aggregate time series data on state and local government spending, which point out that state and local government spending falls in response to cuts in intergovernmental grants (from the federal government). …