Do Businessmen Make Good Governors?

34 Pages Posted: 30 Jun 2015 Last revised: 18 Sep 2015

See all articles by Florian Neumeier

Florian Neumeier

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

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Date Written: September 15, 2015

Abstract

This paper empirically evaluates the economic performance of U.S. state governors who came to the position from a business background (CEO governors), focusing on the growth rate of real personal income per capita, unemployment rate, private investment, and income inequality. Methodologically, I apply a matching method to account for the endogeneity of political selection. Using entropy balancing, I identify credible counterfactuals for CEO governors, that is, governors without a business background who took office under similar economic and fiscal situations. I find, first, that businesspeople tend to take office in times of economic and fiscal strain. Second, the tenures of CEO governors are associated with a 0.6 percentage points higher annual income growth rate, a 0.4 pp higher growth rate of the private capital stock, and a 0.6 percentage points lower unemployment rate than are the tenures of non-CEO governors. Also, state-level income inequality decreases when CEO governors hold office, indicating that low-income households benefit from the economic upswing. Third, the positive effect of having a CEO governor increases with time in office. Fourth, Republican CEO governors perform slightly better than their Democratic colleagues.

Keywords: U.S. Governors, U.S. politics, U.S. states, economic growth, unemployment, income inequality, businessmen, CEO, entropy balancing

JEL Classification: C21, E24, E60, O47

Suggested Citation

Neumeier, Florian, Do Businessmen Make Good Governors? (September 15, 2015). Available at SSRN: https://ssrn.com/abstract=2624591 or http://dx.doi.org/10.2139/ssrn.2624591

Florian Neumeier (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

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