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A contribution to the theory of pork barrel spending

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  • V. V. Chari
  • Harold L. Cole

Abstract

In this paper we present a formal model of vote trading within a legislature. The model captures the conventional wisdom that if projects with concentrated benefits are financed by universal taxation, then majority rule leads to excessive spending. This occurs because the proponent of a particular bill only needs to acquire the votes of half the legislature and hence internalizes the costs to only half the representatives. We show that Pareto superior allocations are difficult to sustain because of a free rider problem among the representatives. We show that alternative voting rules, such as unanimity, eliminate excessive spending on concentrated benefit projects but lead to underfunding of global public goods.

Suggested Citation

  • V. V. Chari & Harold L. Cole, 1993. "A contribution to the theory of pork barrel spending," Staff Report 156, Federal Reserve Bank of Minneapolis.
  • Handle: RePEc:fip:fedmsr:156
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    References listed on IDEAS

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    1. repec:cup:apsrev:v:83:y:1989:i:04:p:1181-1206_08 is not listed on IDEAS
    2. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Rob, Rafael, 1989. "Pollution claim settlements under private information," Journal of Economic Theory, Elsevier, vol. 47(2), pages 307-333, April.
    4. Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-1819, November.
    5. Chari, V V & Jones, Larry E & Marimon, Ramon, 1997. "The Economics of Split-Ticket Voting in Representative Democracies," American Economic Review, American Economic Association, vol. 87(5), pages 957-976, December.
    6. George J. Mailath & Andrew Postlewaite, 1990. "Asymmetric Information Bargaining Problems with Many Agents," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 351-367.
    7. V.V. Chari & Larry E. Jones, 2000. "A reconsideration of the problem of social cost: Free riders and monopolists," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(1), pages 1-22.
    8. Ferejohn, John A & Fiorina, Morris P, 1975. "Purposive Models of Legislative Behavior," American Economic Review, American Economic Association, vol. 65(2), pages 407-414, May.
    9. Philipson, Tomas J & Snyder, James M, Jr, 1996. "Equilibrium and Efficiency in an Organized Vote Market," Public Choice, Springer, vol. 89(3-4), pages 245-265, December.
    10. Thomas Romer & Howard Rosenthal, 1979. "Bureaucrats Versus Voters: On the Political Economy of Resource Allocation by Direct Democracy," The Quarterly Journal of Economics, Oxford University Press, vol. 93(4), pages 563-587.
    11. Weingast, Barry R & Shepsle, Kenneth A & Johnsen, Christopher, 1981. "The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 642-664, August.
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    Keywords

    Expenditures; Public;

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