A Replication of "The Political Determinants of Federal Expenditure at the State Level (Public Choice, 2005)

This paper replicates and analyses a study by Hoover and Pecorino (2005) on federal spending in US states. HP” namely, that since every state is represented by two senators, small states have a disproportionate influence relative to their population size. Using H&P’s data, we both replicate their results, and demonstrate strong support for the small state effect when we formally test their predictions. The contribution of this study is that we demonstrate that this empirical support vanishes when we (i) employ cluster robust standard errors rather than conventional OLS standard errors, and (ii) include a variable for population growth as suggested in a recent study by Larcinese et al. (2013). Our results lead us to conclude that there is no evidence to support the hypothesis of a “small state effect.”