We 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%u2019s constituency is more narrow than that of the powerful legislators.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
12332.
Length: Date of creation: Jun 2006 Date of revision: Handle: RePEc:nbr:nberwo:12332
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Find related papers by JEL classification: H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
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References listed on IDEAS 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.:
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.
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