Budget deficits as devices for appropriating extra funds: An investigation of sharing rules

Sverre Grepperud

No 2002:11, HERO Online Working Paper Series from University of Oslo, Health Economics Research Programme

Abstract: This paper considers a model with a sponsor and several bureaus to analyse the role of sharing rules. Various incentives for budget overspending are identified; among them the overspending of budgets due to soft budget constraints. Four different sharing rules are also considered that differ with respect to their strategic properties and whether the share is exogenous or endogenous.

The results show that sharing on the basis of egalitarian principles yields a lower budget deficit than sharing based upon relative deficits both in symmetric and asymmetric games. The ranking of deficits that follow from sharing based upon relative budgets and sharing that equalises ex-post debt ratios is shown to depend on the properties of the health production function.

Keywords: Budget deficits; bailouts; appropriating activities (search for similar items in EconPapers)
JEL-codes: D29 H72 I18 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2009-06-29
New Economics Papers: this item is included in nep-gth
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