Efficiency of Flexible Budgetary Institutions

T. Renee Bowen, Ying Chen, Hülya Eraslan and Jan Zapal
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T. Renee Bowen: Stanford University

Research Papers from Stanford University, Graduate School of Business

Abstract: Which budgetary institutions result in efficient provision of public goods? We analyze a model with two parties bargaining over the allocation to a public good each period. Parties place different values on the public good, and these values may change over time. We model a budgetary institution as the rules governing feasible allocations to mandatory and discretionary spending programs. Mandatory spending is enacted by law and remains in effect until changed, and thus induces an endogenous status quo, whereas discretionary spending is periodic appropriations that are not allocated if no new agreement is reached. We show that discretionary only institutions lead to dynamic inefficiencies and mandatory only institutions can lead to both dynamic and static inefficiencies. By introducing flexibility into budgetary institutions, either through a combination of mandatory and discretionary spending, or through a state-contingent mandatory program, we obtain static and dynamic efficiency.

Date: 2015-01
New Economics Papers: this item is included in nep-cdm and nep-mfd
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Efficiency of flexible budgetary institutions (2017)
Working Paper: Efficiency of Flexible Budgetary Institutions (2016)
Working Paper: Efficiency of Flexible Budgetary Institutions (2016)
Working Paper: Efficiency of Flexible Budgetary Institutions (2015)
Working Paper: Efficiency of Flexible Budgetary Institutions (2015)
Working Paper: Efficiency of Flexible Budgetary Institutions (2015)
Working Paper: Efficiency of Flexible Budgetary Institutions (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:3185

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