A contribution to the theory of pork barrel spending

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A contribution to the theory of pork barrel spending

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V.V. Chari
Harold Cole

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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.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 156.

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Date of creation: 1993
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Handle: RePEc:fip:fedmsr:156

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Keywords: Expenditures; Public;

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Ferejohn, John A & Fiorina, Morris P, 1975. "Purposive Models of Legislative Behavior," American Economic Review, American Economic Association, vol. 65(2), pages 407-14, May. [Downloadable!] (restricted)
V. V. Chari & Larry E. Jones, 1991. "A reconsideration of the problem of social cost: free riders and monopolists," Staff Report 142, Federal Reserve Bank of Minneapolis. [Downloadable!]
Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
Rob, Rafael, 1989. "Pollution claim settlements under private information," Journal of Economic Theory, Elsevier, vol. 47(2), pages 307-333, April. [Downloadable!] (restricted)
Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-819, November. [Downloadable!] (restricted)
Other versions:
- Bengt Holmstrom & Roger B. Myerson, 1981. "Efficient and Durable Decision Rules with Incomplete Information," Discussion Papers 495, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
V. V. Chari & Larry E. Jones & Ramon Marimon, 1997. "The economics of split-ticket voting in representative democracies," Working Papers 582, Federal Reserve Bank of Minneapolis. [Downloadable!]
Other versions:
- 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 957-76, December. [Downloadable!] (restricted)
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 642-64, August. [Downloadable!] (restricted)
Mailath, George J & Postlewaite, Andrew, 1990. "Asymmetric Information Bargaining Problems with Many Agents," Review of Economic Studies, Blackwell Publishing, vol. 57(3), pages 351-67, July. [Downloadable!] (restricted)
Romer, Thomas & Rosenthal, Howard, 1979. "Bureaucrats versus Voters: On the Political Economy of Resource Allocation by Direct Democracy," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 563-87, November. [Downloadable!] (restricted)

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Andres Velasco, 1997. "Debts and Deficits with Fragmented Fiscal Policymaking," NBER Working Papers 6286, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Andres Velasco, 1997. "A Model of Endogenous Fiscal Deficits and Delayed Fiscal Reforms," NBER Working Papers 6336, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Battaglini, Marco & Coate, Stephen, 2007. "A Dynamic Theory of Public Spending, Taxation and Debt," Working Papers 07-04, Cornell University, Center for Analytic Economics. [Downloadable!]
Other versions:
- Marco Battaglini & Stephen Coate, 2007. "A Dynamic Theory of Public Spending, Taxation and Debt," Discussion Papers 1441, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
- Marco Battaglini & Steve Coate, 2006. "A Dynamic Theory of Public Spending, Taxation and Debt," Levine's Bibliography 122247000000001094, UCLA Department of Economics. [Downloadable!]
- Marco Battaglini & Stephen Coate, 2006. "A Dynamic Theory of Public Spending, Taxation and Debt," NBER Working Papers 12100, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Marco Battaglini & Stephen Coate, 2006. "A Dynamic Theory of Public Spending, Taxation and Debt," NajEcon Working Paper Reviews 321307000000000026, www.najecon.org. [Downloadable!]
- Marco Battaglini & Stephen Coate, 2008. "A Dynamic Theory of Public Spending, Taxation, and Debt," American Economic Review, American Economic Association, vol. 98(1), pages 201-36, March. [Downloadable!]
V.V. Chari & Harold Cole, 1993. "Why are representative democracies fiscally irresponsible?," Staff Report 163, Federal Reserve Bank of Minneapolis. [Downloadable!]
Baqir, Reza, 1999. "Districts, spillovers, and government overspending," Policy Research Working Paper Series 2192, The World Bank. [Downloadable!]
Jess Benhabib & Andres Velasco, 1995. "On the economics of fiscal populism in an open economy," Discussion Paper / Institute for Empirical Macroeconomics 97, Federal Reserve Bank of Minneapolis. [Downloadable!]
Other versions:
- 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. [Downloadable!]
Velasco, A., 1998. "Debts and Deficits with Fragmented Fiscal Policymaking," Working Papers 98-06, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]

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