Budgetary Devices for Curbing Spending Prone Ministers and Bureaucrats

Otto Swank ()

Public Choice, 2002, vol. 111, issue 3-4, 237-57

Abstract: In this paper I study a simple game of the budgetary process. The game has three players. A spending prone minister, who proposes a budget, a prime minister, who accepts or vetoes, and a bureaucrat who provides non-verifiable information about policy. The bureaucrat is appointed by the spending minister. I show that in this setting public spending is excessive. This result stems from the proposal power of the minister, and his incentive to appoint a spending prone bureaucrat. Next, I examine two devices for controlling public spending: binding budget targets imposed by the prime minister, and delegating veto power to a spending averse finance minister. It is shown that the latter device is more effective than the former device to curb a spending prone minister, because it not only reduces the proposal power of the spending minister, but also induces him to appoint less spending prone bureaucrats. Copyright 2002 by Kluwer Academic Publishers

Date: 2002
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