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Transparency, Performance, and Agency Budgets: A Rational Expectations Modeling Approach


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  • Rosen Valchev

    (Duquesne University)

  • Antony Davies

    (Duquesne University)


Existing research suggests that bureaucrats’ optimal behavior is to maximize their agency’s budgets, but does not account for information imperfections nor explore the tactics bureaucrats employ in maximizing their budgets. Drawing on the rational expectations literature, we propose a new theoretical model that describes the behaviors of politicians who, using imperfect information, judge an agency’s performance, and bureaucrats who, by varying the agency’s transparency, alter the degree of information imperfection and so influence the politicians’ abilities to judge the agency’s performance. We then fit data from the government’s Performance Accountability Reports and the Scorecard data set to our model and obtain empirical results that are consistent with what our theoretical model predicts.

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Bibliographic Info

Paper provided by The George Washington University, Department of Economics, Research Program on Forecasting in its series Working Papers with number 2009-004.

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Length: 23 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:gwc:wpaper:2009-004

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Keywords: bureaucracy; agency; budget; budget maximization; transparency; performance; imperfect information; Government Performance Reports Act; Scorecard;

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  1. Alesina, Alberto F & Tabellini, Guido, 1988. "Voting on the Budget Deficit," CEPR Discussion Papers, C.E.P.R. Discussion Papers 269, C.E.P.R. Discussion Papers.
  2. Davies, Antony, 2006. "A framework for decomposing shocks and measuring volatilities derived from multi-dimensional panel data of survey forecasts," International Journal of Forecasting, Elsevier, Elsevier, vol. 22(2), pages 373-393.
  3. Banks, Jeffrey S, 1990. "Monopoly Agenda Control and Asymmetric Information," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(2), pages 445-64, May.
  4. De Alessi, Louis, 1969. "Implications of Property Rights for Government Investment Choices," American Economic Review, American Economic Association, American Economic Association, vol. 59(1), pages 13-24, March.
  5. Fiorina, Morris P. & Noll, Roger G., 1978. "Voters, bureaucrats and legislators : A rational choice perspective on the growth of bureaucracy," Journal of Public Economics, Elsevier, Elsevier, vol. 9(2), pages 239-254, April.
  6. Bert Green & John Tukey, 1960. "Complex analyses of variance: General problems," Psychometrika, Springer, Springer, vol. 25(2), pages 127-152, June.
  7. Davies, Antony & Cline, Thomas W., 2005. "A consumer behavior approach to modeling monopolistic competition," Journal of Economic Psychology, Elsevier, Elsevier, vol. 26(6), pages 797-826, December.
  8. Pommerehne, Werner W & Schneider, Friedrich, 1978. "Fiscal Illusion, Political Institutions, and Local Public Spending," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 31(3), pages 381-408.
  9. Breton, Albert & Wintrobe, Ronald, 1975. "The Equilibrium Size of a Budget-maximizing Bureau: A Note on Niskanen's Theory of Bureaucracy," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 83(1), pages 195-207, February.
  10. Davies, Anthony & Lahiri, Kajal, 1995. "A new framework for analyzing survey forecasts using three-dimensional panel data," Journal of Econometrics, Elsevier, Elsevier, vol. 68(1), pages 205-227, July.
  11. Wagner, Richard E & Weber, Warren E, 1975. "Competition, Monopoly, and the Organization of Government in Metropolitan Areas," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 18(3), pages 661-84, December.
  12. Mackay, Robert J & Weaver, Carolyn L, 1983. "Commodity Bundling and Agenda Control in the Public Sector," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 98(4), pages 611-35, November.
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