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Budget Inflexibility

Author

Listed:
  • Juan Carlos Echeverry
  • Leopoldo Fergusson
  • Pablo Querubín

Abstract

The study of budgetary institutions has long been an important topic in the economic literature. Nonetheless, the degree of rigidity or inflexibility in budget preparation, a prime preoccupation for policy makers and in particular for finance ministers since a long time ago, has been relatively unexplored. In this paper we show that budget inflexibility can take several forms and argue that it is likely to be closely related to various types of political conflict present in the budget process. Moreover, we study one particular form of budget inflexibility and its connection with one specific (but perhaps the most important) political force driving the budget process. More specifically, we discuss some of the consequences of "expenditure inflexibility," defined as the existence of transfers to special interests enjoying constitutional or legal protection which impede their modification in the short run, in a simple model of legislative bargaining that captures the Tragedy of the Commons present in public budget allocation.

Suggested Citation

  • Juan Carlos Echeverry & Leopoldo Fergusson & Pablo Querubín, 2005. "Budget Inflexibility," Documentos CEDE 2070, Universidad de los Andes, Facultad de Economía, CEDE.
    • Handle: RePEc:col:000089:002070
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    File URL: https://repositorio.uniandes.edu.co/bitstream/handle/1992/7960/dcede2005-52.pdf
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    References listed on IDEAS

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    Cited by:

    1. Mr. Anoop Singh & Mr. Martin D. Cerisola, 2006. "Sustaining Latin America's Resurgence: Some Historical Perspectives," IMF Working Papers 2006/252, International Monetary Fund.

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    More about this item

    Keywords

    Colombia; Fiscal Policy; Budget; Inflexibility;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)

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