Matt Mitchell’s Neighborhood Effects blog post, which cites David Primo’s work on government shutdown and spending increases, was cited in the Washington Post’s Wonkbook. Tyler Cowen’s comments on Matt’s post are also included.

Evidence from 23 states suggests that government shutdowns lead to higher spending, writes Matt Mitchell: “It turns out that in 23 U.S. states, the government will automatically shut down in the event that the governor and the legislature fail to agree on a budget. In his work on budget rules, David Primo examined the theoretical impact of these provisions from a game theoretic perspective. He noted that in states with an automatic shutdown provision, ‘the legislature will be able to achieve its ideal budget, so long as the governor prefers it to no spending.’ He therefore predicted that states with such a provision will spend more than states without such a rule. He then tested the hypothesis, controlling for a number of other factors known to impact state spending and found that states with an automatic shutdown provision actually spend about $64 more per capita than other states. As he notes, ‘This effect is remarkably large, given that shutdowns occur rarely.’”

Tyler Cowen comments: ”Maybe you’re not convinced by that $64 difference. Maybe you ascribe it to unobserved variables. Still, it is hard to argue, based on the evidence, that shutdowns help the cause of fiscal conservatism.”