Divided We Reform? Evidence from US Welfare Policies
CESifo, Munich, 2014
CESifo Working Paper No. 4564
![](https://cesifo.org/DocImg/cesifo1_wp4564.jpg?c=1689236871)
Divided government is often thought of as causing legislative deadlock. I investigate the link between divided government and economic reforms using a novel data set on welfare reforms in US states between 1978 and 2010. Panel data regressions show that under divided government a US state is around 25% more likely to adopt a welfare reform than under unified government. An analysis of close elections providing quasi-random variation in the form of government and other robustness checks confirm this counter-intuitive finding. The empirical evidence is consistent with an explanation based on policy competition between governor, senate, and house.
Public Choice
Public Finance