This paper investigates empirically how political ideology influences size and scope of government as measured by the size of government, tax structure and labor market regulation. Our dataset comprises 48 US states over the 1981-2005 period. We employ several indicators of political ideology that have been used in the literature and introduce a new index that considers spatial and temporal differences in Democratic and Republican Party ideology. The main result suggests that Republican governors and Republican dominated legislatures prefer a smaller size and scope of government than the Democrats. Coding ideology with the new more precise index gives rise to sharper results. Finally, we show that ideology-induced policies were counteracted under approval division, i.e. when governors and the majority in the House belonged to one party and the Senate majority to the other.
