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Pro-Business Policy Methods

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Focus on Table 2. Then, interpret columns 1 and 3. Why do the authors use IV method?

The Table 2 in the entitled paper written by Timothy Besley, Torsten Persson and Daniel M. Sturm considers three measures for policy stance. Namely, tax revenue as a percentage of state income, state infrastructure spending as a percentage share of capital outlays in total state government expenditure, and whether a state has a right-to-work laws. All coefficients for political competition are significant. That tells us that political competition strongly correlated with pro-business policy choices. Especially, the increase of political competition decreases the percentage of tax revenue of state income, increases the percentage of infrastructure spending

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