Transparency, Performance, and Agency Budgets: A Rational Expectations Modeling Approach

Rosen Valchev and Antony Davies
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Rosen Valchev: Duquesne University

No 2009-004, Working Papers from The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting

Abstract: Existing research suggests that bureaucrats’ optimal behavior is to maximize their agency’s budgets, but does not account for information imperfections nor explore the tactics bureaucrats employ in maximizing their budgets. Drawing on the rational expectations literature, we propose a new theoretical model that describes the behaviors of politicians who, using imperfect information, judge an agency’s performance, and bureaucrats who, by varying the agency’s transparency, alter the degree of information imperfection and so influence the politicians’ abilities to judge the agency’s performance. We then fit data from the government’s Performance Accountability Reports and the Scorecard data set to our model and obtain empirical results that are consistent with what our theoretical model predicts.

Keywords: bureaucracy; agency; budget; budget maximization; transparency; performance; imperfect information; Government Performance Reports Act; Scorecard (search for similar items in EconPapers)
JEL-codes: D73 D82 H11 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2009-12
New Economics Papers: this item is included in nep-cta
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