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Separation of powers and the budget process

Author

Listed:
  • Grossman, Gene M.
  • Helpman, Elhanan

Abstract

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 an executive agency that 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's constituency is more narrow than that of the powerful legislators.

Suggested Citation

  • Grossman, Gene M. & Helpman, Elhanan, 2008. "Separation of powers and the budget process," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 407-425, April.
  • Handle: RePEc:eee:pubeco:v:92:y:2008:i:3-4:p:407-425
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    References listed on IDEAS

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    1. Persson, Torsten & Tabellini, Guido, 1999. "Political economics and macroeconomic policy," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 22, pages 1397-1482 Elsevier.
    2. Manuel Amador & Iván Werning & George-Marios Angeletos, 2006. "Commitment vs. Flexibility," Econometrica, Econometric Society, vol. 74(2), pages 365-396, March.
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    4. 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.
    5. repec:cup:apsrev:v:98:y:2004:i:02:p:293-310_00 is not listed on IDEAS
    6. James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1, January.
    7. Sean Gailmard, 2002. "Expertise, Subversion, and Bureaucratic Discretion," Journal of Law, Economics, and Organization, Oxford University Press, vol. 18(2), pages 536-555, October.
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    Cited by:

    1. Olper, Alessandro & Raimondi, Valentina, 2008. "Consitutional Rules and Agricultural Policy Outcomes," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43870, European Association of Agricultural Economists.
    2. repec:eee:macchp:v2-2599 is not listed on IDEAS
    3. Benjamin E. Diokno, 2010. "Philippine fiscal behavior in recent history," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 47(1), pages 39-87, June.
    4. Leandro De Magalhães & Lucas Ferrero, 2015. "Separation of powers and the tax level in the U.S. states," Southern Economic Journal, Southern Economic Association, vol. 82(2), pages 598-619, October.
    5. Alberto Alesina & Andrea Passalacqua, 2015. "The Political Economy of Government Debt," NBER Working Papers 21821, National Bureau of Economic Research, Inc.
    6. Lee J. Alston & Bernardo Mueller & Marcus André Melo & Carlos Pereira, 2010. "The Political Economy of Productivity in Brazil," IDB Publications (Working Papers) 1123, Inter-American Development Bank.
    7. Leandro De Magalhães & Lucas Ferrero, 2012. "Separation of Powers and the Size of Government in the U.S. States," The Centre for Market and Public Organisation 12/285, Department of Economics, University of Bristol, UK.
    8. Jeremy Jackson, 2013. "Tax earmarking, party politics and gubernatorial veto: theory and evidence from US states," Public Choice, Springer, vol. 155(1), pages 1-18, April.
    9. Thomas Braendle & Alois Stutzer, 2013. "Political selection of public servants and parliamentary oversight," Economics of Governance, Springer, vol. 14(1), pages 45-76, February.
    10. Leandro M. De Magalhães & Lucas Ferrero, 2009. "Budgetary Separation of Powers in the American States and the Tax Level: A Regression Discontinuity Design," The Centre for Market and Public Organisation 09/225, Department of Economics, University of Bristol, UK.
    11. Krogstrup, Signe & Wyplosz, Charles, 2006. "A Common Pool Theory of Deficit Bias Correction," CEPR Discussion Papers 5866, C.E.P.R. Discussion Papers.
    12. Krogstrup, Signe & Wyplosz, Charles, 2010. "A common pool theory of supranational deficit ceilings," European Economic Review, Elsevier, vol. 54(2), pages 269-278, February.

    More about this item

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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