According to our model effective 'budgetary' separation of power occurs in the states with the line-item veto when the Governor is not aligned with the Legislature. Only then is the Legislature, which approves the budget and sets the tax level, not the full residual claimant of a tax release....

Consider a principal-agent relationship in which more effort by the agent raises the likelihood of success. This paper provides conditions such that no success bonus induces the agent to exert more effort and the optimal contract is independent of success. Moreover, success bonuses may even...

Should the Federal government and the remaining American states adopt the line item veto? What are its effects? We use regression discontinuity design to claim that in states with the line item veto, divided government has a causal negative effect on the tax level. By investigating a panel of 38...