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Public Choice

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28-06-2016

Term limits, time horizons and electoral accountability

Authors: J. Sebastian Leguizamon, George R. Crowley

Published in: Public Choice | Issue 1-2/2016

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Abstract

Term limits have been known to reduce electoral accountability by removing the possibility of reelection, thus affecting economic policy choices (i.e., the ‘lame duck’ effect). We show that the magnitude and statistical significance of this effect is influenced by the expected length of a future career. By using incumbent age as a proxy for expected career length, we find that the lame-duck effect is statistically observable only among those politicians with long careers ahead. Using data on US governors from 1950 to 2005, we find evidence that the influence of term limits is heterogeneous, primarily influencing young incumbents who hope to have long careers and thus have stronger incentives to remain accountable to voters. Indeed, we find little evidence of a lame-duck effect among older incumbents, suggesting that their already-shortened time horizons may offset the term limit effect.

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It is commonly believed that political entrenchment may happen because of incumbency’s advantages, among other things. Olson (1982) provides a thorough discussion of the various issues surrounding entrenched interests in government.

For example, Besley and Case find that retiring governors who later run for seats in Congress are concerned with maintaining their reputational capital and end up taxing and spending less than those who retire but do not run for Congress. Even after accounting for retirements, they find statistical evidence that those governors who cannot stand for reelection because of term limits still tax and spend more, on average. However, Besley and Case (1995a) broadly define retirement as not running for the same office in the subsequent year. It is quite possible that politicians may retire when they are young, only to run for other offices later in life. This possibility suggests that age may be able to capture the potential political longevity better than simple retirement from office, an argument central to the present paper.

Most of the previous literature examining the effects of term limits on fiscal choices among US governors have used robust (i.e., Huber/White) standard errors. Recent developments in econometrics have highlighted the importance of clustering, particularly when using state-year panel data with binary regressors (Cameron and Miller 2015). We especially thank the editor for pointing this out on an earlier version.

Bender and Lott (1996) provide a survey of this literature. Specific aspects studied include last-period effects on the voting behavior of members of Congress (see, for example, Lott 1987; Lott and Bronars 1993; DeBaker 2012) and the role played by reputation or securing the election of political “heirs” in mitigating last-period loss of electoral accountability (see, for example, Laband and Lentz 1985; Lott 1990; Crowley and Reece 2013). Lopez (2003) provides a comprehensive survey of the theory and work specific to term limits.

We follow the traditional Besley and Case (1995a) approach, which shows term limits to remove accountability and reduce voter welfare, as opposed to more recent models, such as Smart and Sturm (2013), which argue term limits are voter-welfare-improving. Importantly, our central thesis—that the length of the incumbent’s time horizon has important implications for the effect of term limits at the margin—holds true regardless of whether term limits are welfare-enhancing or welfare-reducing from the perspective of voters.

The formal Besley and Case (1995a) model is a two-period game wherein voters, after observing their first period payoff, update their expectations regarding the incumbent’s type using Bayes’ Rule. Besley (2006) provides a good treatment of the formal model, which is beyond the scope of the present paper.

Note that congruent incumbents are by nature those who will always choose policy that is in voters’ best interests.

Besley and Case (1995a) briefly acknowledge the importance of considering time horizons. They account for retiring politicians, recognizing that those not in that position may care about their long-term reputations.

Note that throughout the empirical analysis we use “term limits” to control for the fact that an incumbent cannot run for reelection in the next term (i.e., being in his/her last term). Thus, we do not measure the effect of implementing term limits explicitly. Although a few states may have introduced term limits during our sample period, the majority of incumbents were aware of reelection constraints (even those potentially forthcoming) prior to being elected to office for the first time.

We use the Consumer Price Index to adjust all nominal values. We adjust values to 1982 dollars to make our results comparable to those in previous studies, particularly Besley and Case (1995a) and Crowley and Reece (2013).

Details on data sources can be found in the online appendix.

Note that the youngest governor in the dataset is 33 years of age. Bill Clinton (AR) and Frank Clement (TN) where first elected at age 33. The oldest governor in the dataset is Cecil Underwood (WV) who was first elected in 1957 and returned to office at the age of 75 in 1997.

See Lott and Reed (1989) and Besley and Case (1995a) for references to sorting in the congressional literature.

A complete table of these estimated marginal effects (similar to Tables 4 and 6) is available upon request.

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Title: Term limits, time horizons and electoral accountability
Authors: J. Sebastian Leguizamon
George R. Crowley
Publication date: 28-06-2016
Publisher: Springer US
Published in: Public Choice / Issue 1-2/2016
Print ISSN: 0048-5829
Electronic ISSN: 1573-7101
DOI: https://doi.org/10.1007/s11127-016-0347-2

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