Separation of Powers and the Budget Process

Gene Grossman () and Elhanan Helpman

No 12332, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study budget formation in a model featuring separation of powers. In our model, the legislature designs a budget bill that can include a cap on total spending and earmarked allocations to designated public projects. Each project provides random benefits to one of many interest groups. The legislature can delegate spending decisions to the executive, who can observe the productivity of all projects before choosing which to fund. However, the ruling coalition in the legislature and the executive serve different constituencies, so their interests are not perfectly aligned. We consider settings that differ in terms of the breadth and overlap in the constituencies of the two branches, and associate these with the political systems and circumstances under which they most naturally arise. Earmarks are more likely to occur when the executive serves broad interests, while a binding budget cap arises when the executive%u2019s constituency is more narrow than that of the powerful legislators.

JEL-codes: H61 D78 H41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-cdm, nep-pbe and nep-pol
Date: 2006-06
Note: PE POL
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Related works:
Working Paper: Separation of Powers and the Budget Process (2006)
Working Paper: Separation of Powers and the Budget Process (2006)
Journal Article: Separation of powers and the budget process (2008)
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