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Budget Processes: Theory and Experimental Evidence

Author

Listed:
  • Karl-Martin Ehrhart

    (University of Karlsruhe)

  • Roy Gardner

    (Indiana University Bloomington)

  • Juergen von Hagen

    (University of Bonn)

  • Claudia Keser

    (IBM T.J. Watson Research Center)

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. Ferejohn and Krehbiel (1987) showed theoretically that this need not be the case. We test experimentally the theoretical predictions of their work. The evidence from these experiments lends strong support to their theory, both at the aggregate and the individual subject level.

Suggested Citation

  • Karl-Martin Ehrhart & Roy Gardner & Juergen von Hagen & Claudia Keser, 2006. "Budget Processes: Theory and Experimental Evidence," CAEPR Working Papers 2006-009, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
  • Handle: RePEc:inu:caeprp:2006009
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    References listed on IDEAS

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    2. 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.
    3. Gebhard Kirchgassner, 2002. "The effects of fiscal institutions on public finance: a survey of the empirical evidence," Chapters, in: Stanley L. Winer & Hirofumi Shibata (ed.), Political Economy and Public Finance, chapter 9, Edward Elgar Publishing.
    4. 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 Management.
    5. Thomas Demuynck, 2015. "Statistical inference for measures of predictive success," Theory and Decision, Springer, vol. 79(4), pages 689-699, December.
    6. Itay Ringel & Asher Tishler, 2011. "The Government Budget Allocation Process and National Security: An Application to the Israeli–Syrian Arms Race," Chapters, in: Derek L. Braddon & Keith Hartley (ed.), Handbook on the Economics of Conflict, chapter 6, Edward Elgar Publishing.
    7. 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.
    8. 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.
    9. Wehner, Joachim, 2006. "Legislative institutions and fiscal policy," LSE Research Online Documents on Economics 25509, London School of Economics and Political Science, LSE Library.
    10. 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.
    11. Martin Gregor, 2008. "Rozpočtová pravidla a rozpočtový proces: Teorie, empirie a realita České republiky [Budgetary rules and budget process: Theory, empirics, and the case of the Czech Republic]," Politická ekonomie, Prague University of Economics and Business, vol. 2008(4), pages 484-504.
    12. 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.

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    More about this item

    Keywords

    budget processes; voting equilibrium; experimental economics;
    All these keywords.

    JEL classification:

    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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