nach oben

Erschienen in:

2018 | OriginalPaper | Buchkapitel

8. What Determines the Allocation of National Government Grants to the States?

verfasst von : John Joseph Wallis

Erschienen in: Public Choice Analyses of American Economic History

Verlag: Springer International Publishing

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

During the New Deal the federal government initiated a policy of massive grants to states for support of social welfare and other programs. Since that time grants have come to be an integral part of the American fiscal system, and scholars have continued to debate whether the allocation of federal grants between the states is motivated primarily by political or social and economic objectives. This paper shows that, during the 1930s, both political and economic effects were important determinants of grant allocation, but that the Congressional factors considered by Anderson and Tollison are not important while the Presidential factors considered by Wright are. When the analysis is extended to the years 1932–1982, however, Congressional influences do seem important. On the other hand, the dominant influence on federal grant policy over the larger sample appears to be state government expenditures, while both political and economic influences play a smaller role.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Vorheriges Kapitel Demand for Private and State-Provided Health Insurance in the 1910s: Evidence from California

Figures taken Advisory Council of Intergovernmental Relations (1994).

The public finance literature is reviewed in Oates (1972) and Gramlich (1977). For specific studies see Bungey et al. (1991), Chernick (1979), Yinger and Ladd (1989), Craig and Inman (1982), Ladd (1991), and Holcombe and Zardkoohi (1981).

The New Deal literature includes Arrington (1969, 1970), Reading (1973), Wright (1974), Wallis (1984), Wallis (1987), and Anderson and Tollison (1991). The structure of New Deal programs is considered in Wallis (1991).

See Wallis (1984) for a closer analysis of the grant numbers and the problems with using the census numbers.

There is a larger historical literature on grants and intergovernmental relationships during the New Deal (Clark 1938; Benson 1941; Bittermann 1938).

Both state and local governments are important in this process. But state government’s received the largest share of federal grants and, as the empirical sections will demonstrate, it is state rather than local expenditures that influence the allocation of federal grants.

There is little alternative for the Congress and the federal grant administrators. With the exception of general revenue sharing, grant programs are intended to increase government provision of particular services. If states are allowed to reduce their expenditures by substituting federal grants for state dollars, then grants will have a smaller effect of total expenditures than if the grant structure creates incentives for larger state expenditures. See Chernick (1979) for an interesting examination of the interaction between federal and local officials.

Local government expenditures can be treated separately from state expenditures, as will be done in the empirical section.

New Deal “expenditures” are the sum of grants made to states and expenditures within states made directly by the federal government. For many New Deal programs the distinction between direct expenditures and grants was not a clear one. For example, under FERA, relief grants were made to the states. The states then distributed the grants to local relief agencies who distributed the funds to individuals. Under the WPA, which was FERA’s primary successor in 1935, state and local WPA agencies and employees were actually federal government agencies and employees. So WPA wages were given “directly” to individuals while FERA relief benefits were granted to the states. As a result, both the terms expenditures and grants are used to describe the New Deal allocations. FERA policies are described in Wiliams (1939) and WPA policies in Howard (1943).

The employment index is presented and explained in Wallis (1989).

See Wright (1974) for a complete description.

Although Anderson and Tollison (1991) report that both Senate and House tenures are counted in months, their table of summary statistics on p. 170 gives the average tenure in the Senate as 187 months, while the average tenure in the House is 0.22 months, roughly 7 days. Clearly there was an error in their coding. Since the House tenure variables enter into every regression, my results are different than theirs, sometimes significantly so. I have dated tenure in months from the opening day of the Congressional session beginning January 3, 1937 rather than in December of 1937 to facilitate collection of the panel data for the 1930s as well as for the twentieth century. I find average Senate tenure of 176 months (compared to 187 in Anderson and Tollison (1991)), average House tenure of 582 months, average Senate Appropriations Committee tenure of 42 months (compared to 55 months), and average House Appropriations Committee tenure of 59 months.

Anderson and Tollison (1991) report a mean for their Senate Leadership variable of 0.04, implying that Senators from two states held leadership positions between 1933 and 1939 (2/48=0.04). In fact, three Senators held leadership positions. The President Pro Tem of the Senate was Key Pittman of Nevada throughout the period. Joseph Robinson of Arkansas was elected Majority Leader the 73rd, 74th, and 75th Congresses, spanning the years 1933 to 1939. But Robinson died on July 14, 1937 and was replaced by Alben Barkley of Kentucky on July 22. As a result, three states are included in the Senate Leadership dummy variable: Nevada, Arkansas, and Kentucky.

The Nevada effect can be seen in Anderson and Tollison’s (1991) original estimates. When they use electoral votes per capita, the Senate leadership variable is small and statistically insignificant. When they use the state’s rank in electoral votes per capita, the Senate leadership variable is large and statistically significant.

The instrument for the employment index in each state and year is a composite index of state employment constructed from occupational weights from the 1930–1940 census, and monthly information on national employment by industry from the Bureau of Labor Statistics and the Federal Reserve Board. See Wallis (1987) for a detailed explanation.

This result is in a regression including the Political Productivity variable, which is based on long term voting patterns. Several different alternative ways of including recent voting in Presidential elections were tried. Many were significant in simple panels, but using 2SLS and including fixed effects always eliminated their significance and reduced the magnitude of their coefficients substantially.

The demographic variables are population density, percentage white, percentage male, percentage urban, population, the growth rate of total population int he preceding decade, percent of the population that is school age, and the average size of place of resident of typical urban residents. The economic and fiscal variables are real per capita income, real per capita state debt, real per capita local debt, real per capita assessed value of property, the rank of the state in per capita income tax collections, and the number of governments per capita in the state.

Advisory Council of Intergovernmental Relations (1994) Significant features of fiscal federalism. Advisory Council of Intergovernmental Relations, Washington DC

Anderson GM, Tollison RD (1991) Congressional influence and patterns of New Deal spending, 1933–1939. J Law Econ 34(1):161–175

Arrington L (1969) The New Deal in the west: a preliminary statistical inquiry. Pac Hist Rev 38(3):311–316

Arrington LJ (1970) Western agriculture and the New Deal. Agric Hist 44(4):337–353

Benson G (1941) The new centralization: a study of intergovernmental relationships in the United States. Farrar & Rinehart, New York

Bittermann HJ (1938) State and federal grants-in-aid. Mentzer, Bush & Company, Chicago

Bungey M, Grossman P, Kenyon P (1991) Explaining intergovernmental grants: Australian evidence. Appl Econ 23(4):659–668CrossRef

Chernick HA (1979) An economic model of the distribution of project grants. In: Mieszkowski PM, Oakland WH (eds) Fiscal federalism and grants-in-aid. Urban Institute, Washington DC, pp 81–103

Clark JP (1938) The rise of a new federalism: federal-state cooperation in the United States. Russell & Russell, Washington DC

Craig SG, Inman RP (1982) Federal aid and public education: an empirical look at the new fiscal federalism. Rev Econ Stat 64(4):541–552CrossRef

Gramlich EM (1977) Intergovernmental grants: a review of the empirical literature. In: Oates WE (ed) The political economy of fiscal federalism. Lexington Books, Lexington, pp 219–239

Holcombe RG, Zardkoohi A (1981) The determinants of federal grants. South Econ J 48(2): 393–399CrossRef

Howard DS (1943) WPA and federal relief policy. Russell Sage Foundation, New York

Ladd HF (1991) The state aid decision: changes in state aid to local governments, 1982–87. Natl Tax J 44(4):477–496

Oates WE (1972) Fiscal federalism. Harcourt Brace Jovanovich, New York

Office of Government Reports, Statistical Section (1940) Report no. 10, vol II. Government Printing Office, Washington DC

Reading DC (1973) New Deal activity and the states, 1933 to 1939. J Econ Hist 33(4):792–810CrossRef

Wallis JJ (1984) The birth of the old federalism: financing the New Deal, 1932–1940. J Econ Hist 44(1):139–159CrossRef

Wallis JJ (1987) Employment, politics, and economic recovery during the Great Depression. Rev Econ Stat 69(3):516–520CrossRef

Wallis JJ (1989) Employment in the Great Depression: new data and hypotheses. Explor Econ Hist 26(1):45–72CrossRef

Wallis JJ (1991) The political economy of New Deal fiscal federalism. Econ Inq 29(3):510–524CrossRef

Wiliams EA (1939) Federal aid for relief. Columbia University Press, New York

Wright G (1974) The political economy of New Deal spending: an econometric analysis. Rev Econ Stat 56(1):30–38CrossRef

Yinger J, Ladd HF (1989) The determinants of state assistance to central cities. Natl Tax J 42(4):413–428

Titel: What Determines the Allocation of National Government Grants to the States?
verfasst von: John Joseph Wallis
Verlag: Springer International Publishing
Buch: Public Choice Analyses of American Economic History
Print ISBN: 978-3-319-77591-3

Electronic ISBN: 978-3-319-77592-0

Copyright-Jahr: 2018
DOI: https://doi.org/10.1007/978-3-319-77592-0_8