A contribution to the theory of pork barrel spending

Varadarajan Chari and Harold Cole

No 156, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: In this paper we present a formal model of vote trading within a legislature. The model captures the conventional wisdom that if projects with concentrated benefits are financed by universal taxation, then majority rule leads to excessive spending. This occurs because the proponent of a particular bill only needs to acquire the votes of half the legislature and hence internalizes the costs to only half the representatives. We show that Pareto superior allocations are difficult to sustain because of a free rider problem among the representatives. We show that alternative voting rules, such as unanimity, eliminate excessive spending on concentrated benefit projects but lead to underfunding of global public goods.

Keywords: Expenditures; Public (search for similar items in EconPapers)
Date: 1993
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Citations: View citations in EconPapers (17)

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