DOES ELECTORAL ACCOUNTABILITY AFFECT ECONOMIC-POLICY CHOICES - EVIDENCE FROM GUBERNATORIAL TERM LIMITS

This paper analyzes the behavior of U. S. governors from 1950 to 1986 to investigate a reputation-building model of political behavior. We a rgue that differences in the behavior of governors who face a binding term limit and those who are able to run again provides a source of va riation in discount rates that can be used to test a political agency model. We find evidence that taxes, spending, and other policy instrum ents respond to a binding term limit if a Democrat is in office. The r esult is a fiscal cycle in term-limit states, which lowers state incom e when the term limit binds.