Separation of Powers and the Budget Process
AbstractWe study budget formation in a model featuring separation of powers. In our model, the legislature designs a budget bill that can include a cap on total spending and earmarked allocations to designated public projects. Each project provides random benefits to one of many interest groups. The legislature can delegate spending decisions to the executive, who can observe the productivity of all projects before choosing which to fund. However, the ruling coalition in the legislature and the executive serve different constituencies, so their interests are not perfectly aligned. We consider settings that differ in terms of the breadth and overlap in the constituencies of the two branches, and associate these with the political systems and circumstances under which they most naturally arise. Earmarks are more likely to occur when the executive serves broad interests, while a binding budget cap arises when the executive's constituency is more narrow than that of the powerful legislators.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5745.
Date of creation: Jul 2006
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Other versions of this item:
- Gene M. Grossman & Elhanan Helpman, 2006. "Separation of Powers and the Budget Process," NBER Working Papers 12332, National Bureau of Economic Research, Inc.
- Gene M. Grossman & Elhanan Helpman, 2006. "Separation of Powers and the Budget Process," Harvard Institute of Economic Research Working Papers 2119, Harvard - Institute of Economic Research.
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-28 (All new papers)
- NEP-CDM-2006-10-28 (Collective Decision-Making)
- NEP-PBE-2006-10-28 (Public Economics)
- NEP-POL-2006-10-28 (Positive Political Economics)
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