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Budget processes: Theory and experimental evidence

  • Ehrhart, Karl-Martin
  • Gardner, Roy
  • von Hagen, Jurgen
  • Keser, Claudia

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. We show, using structurally induced equilibrium theory, that this need not be the case. To test the implications for budget processes of structurally induced equilibrium theory, we conduct a series of experiments. The evidence from these experiments supports the predictions of structurally induced equilibrium theory, both at the aggregate and at the individual subject level.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 59 (2007)
Issue (Month): 2 (May)
Pages: 279-295

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Handle: RePEc:eee:gamebe:v:59:y:2007:i:2:p:279-295
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  1. Mark Hallerberg & Jürgen von Hagen, 1999. "Electoral Institutions, Cabinet Negotiations, and Budget Deficits in the European Union," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 209-232 National Bureau of Economic Research, Inc.
  2. Selten,Reinhard, . "Properties of a measure of predictive succes," Discussion Paper Serie B 130, University of Bonn, Germany.
  3. 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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  7. von Hagen, Jurgen & Harden, Ian J., 1995. "Budget processes and commitment to fiscal discipline," European Economic Review, Elsevier, vol. 39(3-4), pages 771-779, April.
  8. Poterba, James M. & von Hagen, Jurgen (ed.), 1999. "Fiscal Institutions and Fiscal Performance," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226676234.
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  11. Alberto Alesina & Roberto Perotti, 1995. "The Political Economy of Budget Deficits," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 1-31, March.
  12. Alberto Alesina & Roberto Perotti, 1994. "The Political Economy of Budget Deficits," NBER Working Papers 4637, National Bureau of Economic Research, Inc.
  13. Hallerberg, Mark & von Hagen, Jürgen, 1997. "Electoral Institutions, Cabinet Negotiations, and Budget Deficits within the European Union," CEPR Discussion Papers 1555, C.E.P.R. Discussion Papers.
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  15. 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 Shortfall i," CIRANO Papers 99c-01, CIRANO.
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