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Time Consistency and Bureaucratic Budget Competition

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  • KaiA. Konrad
  • SebastianG. Kessing

Abstract

High employment protection in the public sector results in strategic over-employment if government divisions compete for budgets in a dynamic setting. Bureaucrats who are interested in maximising their divisions' output employ excess labour, since this induces the sponsor to provide complementary inputs in the future. Restrictions on hiring decisions in the public sector can be regarded as provisions to reduce strategic hiring. We also provide evidence from a survey of decision makers in a public sector bureaucracy with very high employment protection. The results confirm that decision makers are aware of the strategic effects of their hiring decisions on budget allocation. Copyright 2008 The Author(s). Journal compilation Royal Economic Society 2008.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 118 (2008)
Issue (Month): 525 (01)
Pages: 1-15

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Handle: RePEc:ecj:econjl:v:118:y:2008:i:525:p:1-15

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  1. Alberto Alesina & Reza Baqir & William Easterly, 1998. "Redistributive Public Employment," NBER Working Papers 6746, National Bureau of Economic Research, Inc.
  2. Rodrik, Dani, 2000. "What Drives Public Employment in Developing Countries?," Review of Development Economics, Wiley Blackwell, vol. 4(3), pages 229-43, October.
  3. Glazer, Amihai, 1989. "Politics and the Choice of Durability," American Economic Review, American Economic Association, vol. 79(5), pages 1207-13, December.
  4. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
  5. Gordon, Roger H, 2001. "Taxes and Privatization," CEPR Discussion Papers 2977, C.E.P.R. Discussion Papers.
  6. Gelb, A & Knight, John B & Sabot, R H, 1991. "Public Sector Employment, Rent Seeking and Economic Growth," Economic Journal, Royal Economic Society, vol. 101(408), pages 1186-99, September.
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Cited by:
  1. Sebastian G. Kessing & Chiara Strozzi, 2012. "The Regional Distribution of Public Employment: Theory and Evidence," Center for Economic Research (RECent) 079, University of Modena and Reggio E., Dept. of Economics.
  2. Marcus Drometer, 2012. "Bureaucrats and short-term politics," Public Choice, Springer, vol. 151(1), pages 149-163, April.

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