Does Electoral Accountability Affect Economic Policy Choices? Evidence from Gubernatorial Term Limits

This paper uses data from U.S. states to investigate whether electoral accountability affects economic policy choices. We set up a model in which the possibility of being re-elected may curtail opportunistic behavior by incumbent governors. We find that facing a binding term limit affects choices on taxes, expenditures, state minimum wages and mandates on workers' compensation. Such effects are found also to vary with the party affiliation of the incumbent. The Democratic party also appears to suffer at the polls following the term of a lame-duck, Democratic incumbent.