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Budget Processes: Theory and Experimental Evidence

Author

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

Abstract

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.

Suggested Citation

  • Ehrhart, Karl-Martin & Gardner, Roy J & Keser, Claudia & von Hagen, Jürgen, 2001. "Budget Processes: Theory and Experimental Evidence," CEPR Discussion Papers 2661, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2661
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    References listed on IDEAS

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    1. Claudia Keser & Roy Gardner, 1999. "Strategic behavior of experienced subjects in a common pool resource game," International Journal of Game Theory, Springer;Game Theory Society, vol. 28(2), pages 241-252.
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    Citations

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    Cited by:

    1. Dietrichson, Jens & Ellegård, Lina Maria, 2011. "Institutions promoting budgetary discipline: evidence from Swedish municipalities," Working Papers 2011:8, Lund University, Department of Economics, revised 05 Aug 2014.
    2. Thomas Demuynck, 2015. "Statistical inference for measures of predictive success," Theory and Decision, Springer, vol. 79(4), pages 689-699, December.
    3. Gebhard Kirchgassner, 2002. "The effects of fiscal institutions on public finance: a survey of the empirical evidence," Chapters,in: Political Economy and Public Finance, chapter 9 Edward Elgar Publishing.
    4. Dharmapala, Dhammika, 2006. "The Congressional budget process, aggregate spending, and statutory budget rules," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 119-141, January.
    5. repec:ddj:fserec:y:2017:p:83-94 is not listed on IDEAS
    6. Wehner, Joachim, 2006. "Legislative institutions and fiscal policy," LSE Research Online Documents on Economics 25509, London School of Economics and Political Science, LSE Library.
    7. Grigorescu, Adriana & Balalia, Alina Elena, 2009. "The involvement of the European Union in funding the member states during the economic crisis period," MPRA Paper 25130, University Library of Munich, Germany.
    8. Sutter, Matthias, 2003. "The Political Economy of Fiscal Policy: An Experimental Study on the Strategic Use of Deficits," Public Choice, Springer, vol. 116(3-4), pages 313-332, September.
    9. Feige, Christian & Ehrhart, Karl-Martin & Krämer, Jan, 2014. "Voting on contributions to a threshold public goods game: An experimental investigation," Working Paper Series in Economics 60, Karlsruhe Institute of Technology (KIT), Department of Economics and Business Engineering.
    10. Itay Ringel & Asher Tishler, 2011. "The Government Budget Allocation Process and National Security: An Application to the Israeli–Syrian Arms Race," Chapters,in: Handbook on the Economics of Conflict, chapter 6 Edward Elgar Publishing.
    11. Jens Dietrichson & Lina Ellegård, 2015. "Institutions improving fiscal performance: evidence from Swedish municipalities," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(5), pages 861-886, October.

    More about this item

    Keywords

    Budget Processes; Experimental Economics; Structurally Induced Equilibrium;

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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