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Late Budgets

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Author Info

  • Asger Lau Andersen
  • David Dreyer Lassen
  • Lasse Holb�ll Westh Nielsen

Abstract

The budget forms the legal basis for government spending, and timely budgets, enacted before the new fiscal year, are an integral part of good governance. This paper examines the causes of late budgets using a unique dataset of budget completion dates for US state governments 1988-2007, constructed from news reports and state budget office surveys. We find 23 percent of state budgets to be late. We show that changing economic circumstances and divided government are the driving forces behind late budgets, which is consistent with a war-of-attrition bargaining model featuring budget baselines and preferences over deviations from such baselines. (JEL C78, D72, H61, H72)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/pol.4.4.1
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Economic Policy.

Volume (Year): 4 (2012)
Issue (Month): 4 (November)
Pages: 1-40

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Handle: RePEc:aea:aejpol:v:4:y:2012:i:4:p:1-40

Note: DOI: 10.1257/pol.4.4.1
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References

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  1. Hsieh, Chang-Tai, 2000. "Bargaining over reform," European Economic Review, Elsevier, vol. 44(9), pages 1659-1676, October.
  2. Gary A. Wagner & Erick M. Elder, 2005. "The Role of Budget Stabilization Funds in Smoothing Government Expenditures over the Business Cycle," Public Finance Review, , vol. 33(4), pages 439-465, July.
  3. Nannestad, Peter & Paldam, Martin, 1997. "The grievance asymmetry revisited: A micro study of economic voting in Denmark,1986-1992," European Journal of Political Economy, Elsevier, vol. 13(1), pages 81-99, February.
  4. James M. Poterba, 1993. "State Responses to Fiscal Crisis: The Effects of Budgetary Institutionsand Politics," NBER Working Papers 4375, National Bureau of Economic Research, Inc.
  5. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  6. Merlo, Antonio, 1996. "Bargaining over governments in a stochastic environment," Bulletins 7476, University of Minnesota, Economic Development Center.
  7. Schmidt, Peter & Witte, Ann Dryden, 1989. "Predicting criminal recidivism using 'split population' survival time models," Journal of Econometrics, Elsevier, vol. 40(1), pages 141-159, January.
  8. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
  9. Daniel Diermeier & Hulya Eraslan & Antonio Merlo, 2003. "A Structural Model of Government Formation," Econometrica, Econometric Society, vol. 71(1), pages 27-70, January.
  10. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
  11. Samuelson, William & Zeckhauser, Richard, 1988. " Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
  12. James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1, May.
  13. James M. Poterba & Jürgen von Hagen, 1999. "Introduction to "Fiscal Institutions and Fiscal Performance"," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 1-12 National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Asger Lau Andersen & David Dreyer Lassen & Lasse Holbøll Westh Nielsen, 2010. "The Impact of Fiscal Governance on Bond Markets: Evidence from Late Budgets and State Government Borrowing Costs," EPRU Working Paper Series 2010-11, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  2. Andreas Bernecker, 2014. "Divided We Reform? Evidence from US Welfare Policies," CESifo Working Paper Series 4564, CESifo Group Munich.
  3. Andersen, Asger Lau & Lassen, David Dreyer & Nielsen, Lasse Holbøll Westh, 2014. "The impact of late budgets on state government borrowing costs," Journal of Public Economics, Elsevier, vol. 109(C), pages 27-35.

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