The Political Determinants of Federal Expenditure at the State Level

Abstract

Small U.S. states are over-represented in the Senate and over-weighted in the electoral college. Atlas et al. (1995) have drawn attention to the effect of the over-representation of small states in the Senate by showing that per capita federal expenditure is positively related to per capita representation in the Senate. Our data cover a later period and are disaggregated into five spending categories compared to the three considered by Atlas et al. In addition, we consider a broader set of political control variables in our regression equation. We confirm the most important result of Atlas et al., which is that state-level federal expenditure is positively related to per capita senate representation for that state. The effect is strongest for procurement spending. By contrast, we find evidence against their result that per capita representation in the House is positively related to per capita federal expenditure.

We include a variety of other political control variables in our analysis, and several of these variables are significant in a subset of our expenditure equations. Electoral votes is another variable which is a function of state size. Electoral votes are negatively associated with spending in several categories, with coefficients indicating that the overall effect is large. This reinforces the small state effect stemming from Senate representation.

We find evidence that states which voted for the sitting president receive less spending per capita compared to states the sitting president lost by a narrow margin. Some other political variables are found to be both statistically and economically significant, but in each case, only for a subset of the spending equations.

Keywords: Senate representation, small state effect in federal spending, political determinants of Federal expenditure

JEL Classification: H0