US State Governments Are Not Leviathans: Evidence from the Economic Freedom Index

Objective. Does increasing a political party's power lead to Leviathan state governments? The evidence is mixed. We use the Economic Freedom of North America (EFNA) Index to measure governmental activity to study the impact of political parties on government outcomes. Methods. We employ instrumental-variable, panel data methods to regress states' EFNA scores on median voter and differentiated-party variables. Results. Party effects are negligible, but a simple median voter explanation emerges. Conclusion. As political power is consolidated in either party, economic freedom increases. This is consistent with a model wherein the median voter has effective agency control with positive monitoring costs and prefers a particular level of so-called economic freedom. These results are inconsistent with Leviathan models of state legislatures.