Political Competition and Economic Performance: Theory and Evidence from the United States

We formulate a model to explain why the lack of political
competition may stifle economic performance and use the United
States as a testing ground for the model’s predictions, exploiting
the 1965 Voting Rights Act which helped break the near monpoly on
political power of the Democrats in southern states. We find
statistically robust evidence that changes in political competition
have quantitatively important effects on state income growth, state
policies, and quality of Governors. By our bottom-line estimate,
the increase in political competition triggered by the Voting
Rights Act raised long-run per capita income in the average
affected state by about 20 percent.