Legislative Bargaining and Incremental Budgeting
AbstractThe notion of 'incrementalism', formulated by Aaron Wildavsky in the 1960's, has been extremely influential in the public budgeting literature. In essence, it entails the claim that legislators engaged in budgetary policymaking accept past allocations, and decide only on the allocation of increments to revenue. Wildavsky explained incrementalism with reference to the cognitive limitations of lawmakers and their desire to reduce conflict. This paper uses a legislative bargaining framework to undertake a formal analysis of incremental budgeting. An exogenously chosen agenda setter proposes budgets and seeks to build coalitions to secure passage, over multiple periods. The central result is that the agenda setter can lower her cost of building a winning coalition, and thereby raise her payoff, by following an incrementalist strategy, which involves maintaining the same coalition every period. First, it is shown within a simple 2-period model that there exist subgame perfect 'incremental budgeting' equilibria of this nature. If the agenda setter is assumed to be able to commit to the 'grandfathering' of past allocations, the unique subgame perfect equilibrium (up to the choice of the coalition members) involves incremental budgeting. The model is then extended to an infinitely repeated setting, and it is shown that the agenda setter's incentives for incremental budgeting are reinforced in this context. Some testable implications (relating incrementalism to various characteristics of the legislature) are also derived. Finally, the implications for incrementalism of heterogeneity among legislators are analyzed.
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2002-10.
Length: 30 pages
Date of creation: Oct 2002
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Legislative bargaining; incremental budgeting; budgetary institutions;
Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-10-23 (All new papers)
- NEP-CDM-2002-10-23 (Collective Decision-Making)
- NEP-PBE-2002-10-23 (Public Economics)
- NEP-POL-2002-10-23 (Positive Political Economics)
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.:
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