Rules, Subjurisdictional Choice, and Congressional Outcomes: An Event Study of Energy Taxation Legislation

Abstract

Formal models in political science are increasingly attentive to institutional features that ostensibly play a crucial part in shaping political outcomes. Propositions yielded by these models have proven difficult to test, however. This study has two aims. Its substantive objective is to extend the spatial model of legislatures to illuminate the mechanisms of influence by committees on congressional outcomes. A broader methodological purpose is to introduce to political science a new and promising technique for testing formal models. Event studies are based on the belief that many political outcomes affect the economic welfare of nongovernmental actors and that, accordingly, actors with a vested interest in public policies respond rationally to changing political expectations. The technique is illustrated by testing formally derived propositions about the effects of rules and of subjurisdictional choice (the Ways and Means Committee's decision about the dimensions of its jurisdiction in which to propose legislation) on Congress's 1974 decision regarding taxation of oil and gas firms. The strong empirical results not only support the theory but also offer promising implications for continued development and testing of formal models of politics and political economy.