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Budget Processes: Theory and Experimental Evidence

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Author Info

  • Karl-Martin Ehrhart

    ()
    (University of Karlsruhe)

  • Roy Gardner

    ()
    (Indiana University Bloomington)

  • Juergen von Hagen

    ()
    (University of Bonn)

  • Claudia Keser

    ()
    (IBM T.J. Watson Research Center)

Abstract

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. Ferejohn and Krehbiel (1987) showed theoretically that this need not be the case. We test experimentally the theoretical predictions of their work. The evidence from these experiments lends strong support to their theory, both at the aggregate and the individual subject level.

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Bibliographic Info

Paper provided by Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington in its series Caepr Working Papers with number 2006-009.

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Length: 28 pages
Date of creation: Sep 2006
Date of revision:
Handle: RePEc:inu:caeprp:2006009

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Keywords: budget processes; voting equilibrium; experimental economics;

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References

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  1. Selten,Reinhard, . "Properties of a measure of predictive succes," Discussion Paper Serie B 130, University of Bonn, Germany.
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  3. Marcel Boyer, 1999. "Les Expos, l'OSM, les universités, les hôpitaux : Le coût d'un déficit de 400 000 emplois au Québec = Expos, Montreal Symphony Orchestra, Universities, Hospitals: The Cost of a 400,000-Job Shortf," CIRANO Papers 99c-01, CIRANO.
  4. Alberto Alesina & Roberto Perotti, 1994. "The Political Economy of Budget Deficits," NBER Working Papers 4637, National Bureau of Economic Research, Inc.
  5. 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.
  6. James M. Poterba & Jürgen von Hagen, 1999. "Introduction to "Fiscal Institutions and Fiscal Performance"," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 1-12 National Bureau of Economic Research, Inc.
  7. James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1.
  8. Eckel, Catherine & Holt, Charles A, 1989. "Strategic Voting in Agenda-Controlled Committee Experiments," American Economic Review, American Economic Association, vol. 79(4), pages 763-73, September.
  9. International Monetary Fund, 1996. "Budget Processes and Commitment to Fiscal Discipline," IMF Working Papers 96/78, International Monetary Fund.
  10. Alberto Alesina & Roberto Perotti, 1995. "The Political Economy of Budget Deficits," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 1-31, March.
  11. Mark Hallerberg & Jurgen von Hagen, 1997. "Electoral Institutions, Cabinet Negotiations, and Budget Deficits in the European Union," NBER Working Papers 6341, National Bureau of Economic Research, Inc.
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Cited by:
  1. Sutter, Matthias, 2003. " The Political Economy of Fiscal Policy: An Experimental Study on the Strategic Use of Deficits," Public Choice, Springer, vol. 116(3-4), pages 313-32, September.
  2. Dharmapala, Dhammika, 2006. "The Congressional budget process, aggregate spending, and statutory budget rules," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 119-141, January.
  3. Dietrichson, Jens & Ellegård, Lina Maria, 2011. "Institutions promoting budgetary discipline: evidence from Swedish municipalities," Working Papers 2011:8, Lund University, Department of Economics, revised 20 Dec 2012.
  4. Gebhard Kirchgässner, 2001. "The Effects of Fiscal Institutions on Public Finance: A Survey of the Empirical Evidence," CESifo Working Paper Series 617, CESifo Group Munich.
  5. Joachim Wehner, 2006. "Legislative institutions and fiscal policy," LSE Research Online Documents on Economics 25509, London School of Economics and Political Science, LSE Library.
  6. Grigorescu, Adriana & Balalia, Alina Elena, 2009. "The involvement of the European Union in funding the member states during the economic crisis period," MPRA Paper 25130, University Library of Munich, Germany.

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