This Paper studies budget processes, both theoretically and experimentally. We compare the outcomes of bottom-up and top-down budget processes. It is often presumed that a top-down budget process leads to a smaller overall budget than a bottom-up budget process. We show, using structurally induced equilibrium theory, that this need not be the case. To test the implications for budget processes of structurally induced equilibrium theory, we conduct a series of experiments. The evidence from these experiments supports the predictions of structurally induced equilibrium theory, both at the aggregate and at the individual subject level.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
2661.
Karl-Martin Ehrhart & Roy Gardner & Jürgen von Hagen & Claudia Keser, 2006.
"Budget Processes: Theory and Experimental Evidence,"
Discussion Papers
146, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
[Downloadable!]
Karl-Martin Ehrhart & Roy Gardner & Juergen von Hagen & Claudia Keser, 2006.
"Budget Processes: Theory and Experimental Evidence,"
Caepr Working Papers
2006-009, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
[Downloadable!]
Find related papers by JEL classification: D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
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