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A contribution to the theory of pork barrel spending

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  • V. V. Chari
  • Harold L. Cole

Abstract

In this paper we present a formal model of vote trading within a legislature. The model captures the conventional wisdom that if projects with concentrated benefits are financed by universal taxation, then majority rule leads to excessive spending. This occurs because the proponent of a particular bill only needs to acquire the votes of half the legislature and hence internalizes the costs to only half the representatives. We show that Pareto superior allocations are difficult to sustain because of a free rider problem among the representatives. We show that alternative voting rules, such as unanimity, eliminate excessive spending on concentrated benefit projects but lead to underfunding of global public goods.

Suggested Citation

  • V. V. Chari & Harold L. Cole, 1993. "A contribution to the theory of pork barrel spending," Staff Report 156, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:156
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    References listed on IDEAS

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    6. V.V. Chari & Larry E. Jones, 2000. "A reconsideration of the problem of social cost: Free riders and monopolists," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(1), pages 1-22.
    7. Ferejohn, John A & Fiorina, Morris P, 1975. "Purposive Models of Legislative Behavior," American Economic Review, American Economic Association, vol. 65(2), pages 407-414, May.
    8. Chari, V V & Jones, Larry E & Marimon, Ramon, 1997. "The Economics of Split-Ticket Voting in Representative Democracies," American Economic Review, American Economic Association, vol. 87(5), pages 957-976, December.
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    11. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    12. Weingast, Barry R & Shepsle, Kenneth A & Johnsen, Christopher, 1981. "The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 642-664, August.
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    Cited by:

    1. Benhabib, Jess & Velasco, Andres, 1994. "On the Economics of Fiscal Populism in an Open Economy," Working Papers 94-22, C.V. Starr Center for Applied Economics, New York University.
    2. Alberto F. Alesina & Roberto Perotti, 1999. "Budget Deficits and Budget Institutions," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 13-36, National Bureau of Economic Research, Inc.
    3. Marco Battaglini & Stephen Coate, 2008. "A Dynamic Theory of Public Spending, Taxation, and Debt," American Economic Review, American Economic Association, vol. 98(1), pages 201-236, March.
    4. Andres Velasco, 1997. "A Model of Endogenous Fiscal Deficits and Delayed Fiscal Reforms," NBER Working Papers 6336, National Bureau of Economic Research, Inc.
    5. Daniel Castellanos, 2004. "Algunas causas y remedios del déficit presupuestal," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 22(46-2), pages 358-448, December.
    6. Alessandro Riboni & Francisco J. Ruge-Murcia, 2010. "Monetary Policy by Committee: Consensus, Chairman Dominance, or Simple Majority?," The Quarterly Journal of Economics, Oxford University Press, vol. 125(1), pages 363-416.
    7. Jones, Mark P. & Sanguinetti, Pablo & Tommasi, Mariano, 2000. "Politics, institutions, and fiscal performance in a federal system: an analysis of the Argentine provinces," Journal of Development Economics, Elsevier, vol. 61(2), pages 305-333, April.
    8. Andres Velasco, 1999. "A Model of Endogenous Fiscal Deficits and Delayed Fiscal Reforms," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 37-58, National Bureau of Economic Research, Inc.
    9. Arsic, Milojko & Nojkovic, Aleksandra & Randjelovic, Sasa, 2017. "Determinants of discretionary fiscal policy in Central and Eastern Europe," Economic Systems, Elsevier, vol. 41(3), pages 367-378.
    10. Baqir, Reza, 1999. "Districts, spillovers, and government overspending," Policy Research Working Paper Series 2192, The World Bank.
    11. Velasco, Andres, 2000. "Debts and deficits with fragmented fiscal policymaking," Journal of Public Economics, Elsevier, vol. 76(1), pages 105-125, April.
    12. Javier Salinas, 1998. "The Constitutional Political Economy of Public Deficits: The Spanish Case 1," Constitutional Political Economy, Springer, vol. 9(3), pages 235-249, September.
    13. Woo, Jaejoon, 2005. "Social polarization, fiscal instability and growth," European Economic Review, Elsevier, vol. 49(6), pages 1451-1477, August.
    14. V. V. Chari & Harold L. Cole, 1993. "Why are representative democracies fiscally irresponsible?," Staff Report 163, Federal Reserve Bank of Minneapolis.
    15. Andres Velasco, 1997. "Debts and Deficits with Fragmented Fiscal Policymaking," NBER Working Papers 6286, National Bureau of Economic Research, Inc.

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    Keywords

    Expenditures; Public;

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