Efficiency of flexible budgetary institutions

• 成果类型: Article
• 署名作者: Bowen, T. Renee; Chen, Ying; Eraslan, Hulya; Zapal, Jan
• 署名单位: Stanford University; Johns Hopkins University; Rice University; Charles University Prague; Czech Academy of Sciences; Economics Institute of the Czech Academy of Sciences; Consejo Superior de Investigaciones Cientificas (CSIC); CSIC - Institut d'Analisi Economica (IAE); Barcelona School of Economics
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2016.10.007
• 发表日期: 2017
• 页码: 148-176
• 关键词: Budget negotiations; Mandatory spending; Discretionary spending; flexibility; endogenous status quo; Sunset provision; dynamic efficiency

摘要

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 focus on budgetary institutions that determine 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 a periodic appropriation that is not allocated if no new agreement is reached. We show that discretionary only and mandatory only institutions typically lead to dynamic inefficiency and that mandatory only institutions can even lead to static inefficiency. By introducing appropriate flexibility in mandatory programs, we obtain static and dynamic efficiency. This flexibility is provided by an endogenous choice of mandatory and discretionary programs, sunset provisions and state-contingent mandatory programs in increasingly complex environments. (C) 2016 Elsevier Inc. All rights reserved.