Mandatory Versus Discretionary Spending: The Status Quo Effect

T. Renee Bowen, Ying Chen and Hülya Eraslan

Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum

Abstract: Do mandatory spending programs such as Medicare improve efficiency? We analyze a model with two parties allocating a fixed budget to a public good and private transfers each period over an infinite horizon. We compare two institutions that differ in whether public good spending is discretionary or mandatory. We model mandatory spending as an endogenous status quo since it is enacted by law and remains in effect until changed. Mandatory programs result in higher public good spending; furthermore, they ex ante Pareto dominate discretionary programs when parties are patient, persistence of power is low, and polarization is low.

Keywords: budget negotiations; mandatory programs; dynamic bargaining; endogenous status quo; public goods (search for similar items in EconPapers)
JEL-codes: C73 D61 D78 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2012-10
New Economics Papers: this item is included in nep-pbe and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (57)

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Related works:
Journal Article: Mandatory versus Discretionary Spending: The Status Quo Effect (2014)
Working Paper: Mandatory versus Discretionary Spending: The Status Quo Effect (2012)
Working Paper: Mandatory Versus Discretionary Spending: the Status Quo Effect (2012)
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