Disclaimer. Don't rely on these old notes in lieu of reading the literature, but they can jog your memory. As a grad student long ago, my peers and I collaborated to write and exchange summaries of political science research. I posted them to a wiki-style website. "Wikisum" is now dead but archived here. I cannot vouch for these notes' accuracy, nor can I say who wrote them.
Alt and Lowry. 1994. Divided government, fiscal institutions, and budget deficits: Evidence from the states. American Political Science Review 88:811-828.
At the state level, three Xs affect fiscal outcomes (i.e. the response to fiscal surplus or deficit): divided government, institutions, and party control.
The authors make 8 hypotheses from the three main variables.
X1: Party control. Without parties, a "benevolent dictator" model would predict simply setting taxes to minimize deadweight loss and provide maximal benefits.
X2: Divided government. Can come in 8 combinations. The authors focus mostly on split-legislature and split-branch divisions. (Indicidentally, they claim that focusing on the differences between split-legislature and split-branch divisions can contribute important insights.)
X3: Institutions. Laws that require a balanced budget or that prohibit carrying a deficit over into the next fiscal year make a balanced budget more likely.
The authors use data from the early 1980s from 48 states.
Research by the same authors
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