Mandatory versus Discretionary Spending: The Status Quo Effect

T. Renee Bowen, Ying Chen and Hülya Eraslan

American Economic Review, 2014, vol. 104, issue 10, 2941-74

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.

JEL-codes: C78 E62 H41 H61 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.10.2941
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (73)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.104.10.2941 (application/pdf)
http://www.aeaweb.org/aer/app/10410/20121335_app.pdf (application/pdf)
http://www.aeaweb.org/aer/ds/10410/20121335_ds.zip (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Mandatory versus Discretionary Spending: The Status Quo Effect (2012)
Working Paper: Mandatory Versus Discretionary Spending: the Status Quo Effect (2012)
Working Paper: Mandatory Versus Discretionary Spending: The Status Quo Effect (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:104:y:2014:i:10:p:2941-74

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().