A NEW THEORY OF THE BUDGETARY PROCESS

Soumaya M. Tohamy, Hashem Dezhbakhsh and Peter H. Aranson

Economics and Politics, 2006, vol. 18, issue 1, 47-70

Abstract: This paper offers an alternative to the view that budgetary decisions are incremental because they are complex, extensive, and conflicted. Our model interprets incrementalism as the result of a legislative political strategy in response to interest group politics and economic conditions. Accordingly, a legislator chooses between single‐period budgeting or multiperiod budgeting, where single‐period budgeting is associated with a greater chance of non‐incremental budgeting outcomes. We use a statistical procedure developed by Dezhbakhsh et al. (2003) for identifying non‐incremental outcomes to test the implications of the model. Results support the model's predictions: a higher discount rate and a persistently large deficit appear to cause departures from incremental budgeting; Democrats' control over the political process have a similar effect, while a higher inflation rate has an opposite effect.

Date: 2006
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