Divided We Reform? Evidence from Us Welfare Policies
Abstract: More than one half of all US state governments are typically divided. Divided government is often thought of as causing legislative deadlock. Accordingly, when being dominated by different parties the executive and the legislative politically block each other hindering economic reforms. This paper is the first to systematically analyze this issue using novel data on welfare reforms conducted by US states between 1978 and 2010. First, I conduct a differences-in-differences analysis including a wide range of controls and taking potentially confounding effects from policy spillovers between states and the 1996 US Welfare Reform at the federal level into account. I find that under divided government a US state is between 25 and 50% more likely to adopt a welfare reform than under unified government. Second, I show how a standard regression discontinuity design (RDD) focusing on close elections can be adjusted to the divided government setting. This paper is the first to use an RDD with multiple interdependent assignment variables. This approach confirms the counter-intuitive result from before.
