The Fiscal Implications of Celebrity Governors

The Economics of Governing has published online “A Test of the Institutionally-Induced Equilibrium Hypothesis: On the Limited Fiscal Impact of Two Celebrity Governors” by Roger Congleton and Yang Zhou, both of West Virginia University. The paper looks at the election of Jesse Ventura and Arnold Schwarzenegger and as given away by the title it finds little impact on their state’s expenditures or deficits. From the introduction (footnotes omitted):

Our main interest in this study is the extent to which state level checks and balances tend to minimize the effects of changes in the individuals holding the post of governorship. The usual approach to do so empirically would be to adopt an international perspective and attempt to determine how differences in federal institutions affect a nation’s policies. An enormous body of international and intra-national empirical research supports the contention that institutions matter in the sense that they affect the kinds of policies adopted by a national government. Our approach is the reverse of the normal one in that we hold institutions constant and attempt to determine whether “shocks” in the forms of very unusual governors affect the fiscal policies of the states governed.

The main tool for the causal evidence is a new variant on the synthetic control method. Here is the full abstract:

The governorships of Jesse Ventura of Minnesota and Arnold Schwarzenegger of California provide two natural experiments for testing the institutionally induced stability hypothesis. Both men rose to their governorships through unique career and electoral paths that would reduce the stabilizing effects of partisan commitments and electoral competition, which would tend to increase their impact on public policy. Nonetheless, our evidence suggests that despite their unique backgrounds and paths to office neither governor had a statistically significant impact on their state’s expenditures or deficits.

Assuming one regards Trump as another celebrity executive, there is an interesting discussion to be had as to what can be learned from this study about the current federal government.

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