Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/333732 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 12186
Publisher: 
Munich Society for the Promotion of Economic Research - CESifo GmbH, Munich
Abstract: 
This paper investigates the causal effect of the term length of political executives on economic policy outcomes. To establish causality, we exploit the staggered adoption of four-year terms for governors across US states, using data for the period 1937-2008. We find that increasing governors' tenure in office from two years to four years reduced state expenditures and revenues by approximately 0.3-0.5 percentage points of GDP. The effect on state finances is primarily driven by a reduction of current spending and grants from the federal government, and it is concentrated in states where the incumbent governor expects fierce competition in the next election. Lastly, we discuss the implications of longer terms for macroeconomic stabilization, political budget cycles, and intergovernmental resource allocation.
Subjects: 
term length
US States finance
political selection
electoral incentives
political accountability
JEL: 
D72
H11
H72
Document Type: 
Working Paper
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