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Transparency, Performance, and Agency Budgets: A Rational Expectations Modeling Approach

Author

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  • Rosen Valchev

    (Duquesne University)

  • Antony Davies

    (Duquesne University)

Abstract

Existing research suggests that bureaucrats’ optimal behavior is to maximize their agency’s budgets, but does not account for information imperfections nor explore the tactics bureaucrats employ in maximizing their budgets. Drawing on the rational expectations literature, we propose a new theoretical model that describes the behaviors of politicians who, using imperfect information, judge an agency’s performance, and bureaucrats who, by varying the agency’s transparency, alter the degree of information imperfection and so influence the politicians’ abilities to judge the agency’s performance. We then fit data from the government’s Performance Accountability Reports and the Scorecard data set to our model and obtain empirical results that are consistent with what our theoretical model predicts.

Suggested Citation

  • Rosen Valchev & Antony Davies, 2009. "Transparency, Performance, and Agency Budgets: A Rational Expectations Modeling Approach," Working Papers 2009-004, The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting.
  • Handle: RePEc:gwc:wpaper:2009-004
    as

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    File URL: https://www2.gwu.edu/~forcpgm/2009-004.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    bureaucracy; agency; budget; budget maximization; transparency; performance; imperfect information; Government Performance Reports Act; Scorecard;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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