Separation of Powers and the Budget Process
Gene M. Grossman
Princeton University - Woodrow Wilson School of Public and International Affairs; Princeton University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)
Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)
Harvard Institute of Economic Research Discussion Paper No. 2119
We study budget formation in a model featuring separation of powers. In our model,the legislature designs a budget bill that can include a cap on total spending and ear-marked allocations to designated public projects. Each project provides random benefits to one of many interest groups. The legislature can delegate spending decisions to the executive, who can observe the productivity of all projects before choosing which to fund. However, the ruling coalition in the legislature and the executive serve different constituencies, so their interests are not perfectly aligned. We consider settings that differ in terms of the breadth and overlap in the constituencies of the two branches, and associate these with the political systems and circumstances under which they most naturally arise. Earmarks are more likely to occur when the executive serves broad interests, while a binding budget cap arises when the executives constituency is more narrow than that of the powerful legislators.
Number of Pages in PDF File: 27
Keywords: government spending, fiscal policy, pork-barrel politics, comparative political economics
JEL Classification: H61,D78,H41working papers series
Date posted: June 13, 2006
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