The Political Economy of Policy Choice: Evidence from State Level Data

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9320894 Case The aim of this research is to investigate the determinants of state policy choices and to consider the interplay between the economic causes and effects of such policies. Many recent papers have exploited cross state variation in policies, in order to identify the effects of a state policy change on some economic outcome variable of interest. For example, the fact that states have different minimum wages and that these wage floors change at different points in time provides a means of investigating the effect of minimum wages on unemployment. Such cases are often referred to as "natural experiments". The goal in this project is to clarify the value of this approach, distinguishing cases where it is applicable from those where it is not, The data that will be used are drawn from a state data base for the United States assembled by the authors for a forty year period (1950 to 1990) and used in their prior work. They will also use data from the out-going rotation groups of the CPS. The latter constitutes a novel approach to empirically investigating political economy questions. ***