Political Dominance and Economic Performance in the American States

This study contributes the literature by developing a new method of measuring political dominance combining the legislative and executive branches in bi-party political system and by investigating the effect of political dominance on economic performance using panel data for forty-six states of United States for the period 1937-1996. Economic performance is measured by the relative level of per-capita personal income and growth of per-capita personal income. This study finds that political dominance has significant negative effects on the level of relative per-capita personal income and on the growth of per-capita personal income. Additionally, this study modifies the two existing measures of political dominance using exclusively seat share of legislative branches or governor’s vote share and examines the short run effect of political dominance on economic performance using these modified measures. It finds that political dominance using exclusively seat share of legislative branches or governor’s vote share either overestimates or underestimates the effect of political dominance on economic performance.