Working Paper: NBER ID: w11484
Authors: Timothy Besley; Torsten Persson; Daniel Sturm
Abstract: One of the most cherished propositions in economics is that market competition by and large raises consumer welfare. But whether political competition has similarly virtuous consequences is far less discussed. This paper formulates a model to explain why political competition may enhance economic performance and uses the United States as a testing ground for the model's implications. It finds statistically robust evidence that political competition has quantitatively important effects on state income growth, state policies, and the quality of Governors.
Keywords: political competition; economic performance; state income growth; governance quality
JEL Codes: D72; H11; H70; N12; O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| political competition (D72) | state income growth (O49) |
| political competition (D72) | lower overall state taxes (H79) |
| political competition (D72) | more business-friendly labor regulations (J89) |
| political competition (D72) | larger share of manufacturing in state production (L69) |
| political competition (D72) | quality of politicians (D72) |
| Voting Rights Act (K16) | political competition (D72) |
| political competition (D72) | state policies (H70) |