Time Consistency and Bureaucratic Budget Competition

15 Pages Posted: 23 Dec 2007

See all articles by Kai A. Konrad

Kai A. Konrad

Max Planck Institute for Tax Law and Public Finance; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

Sebastian G. Kessing

Wissenschaftszentrum Berlin fuer Sozialforschung (WZB) - Market Processes and Governance; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Date Written: 0000

Abstract

High employment protection in the public sector results in strategic over-employment if government divisions compete for budgets in a dynamic setting. Bureaucrats who are interested in maximizing their divisions output employ excess labor, since this induces the sponsor to provide complementary inputs in the future. Restrictions on hiring decisions in the public sector can be regarded as provisions to reduce strategic hiring. We also provide evidence from a survey of decision makers in a public sector bureaucracy with very high employment protection. The results confirm that decision makers are aware of the strategic effects of their hiring decisions on budget allocation.

Suggested Citation

Konrad, Kai A. and Kessing, Sebastian G., Time Consistency and Bureaucratic Budget Competition (0000). The Economic Journal, Vol. 118, Issue 525, pp. 1-15, January 2008. Available at SSRN: https://ssrn.com/abstract=1077981 or http://dx.doi.org/10.1111/j.1468-0297.2007.02101.x

Kai A. Konrad (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

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Germany

HOME PAGE: http://www.tax.mpg.de/en/pub/home.cfm

Centre for Economic Policy Research (CEPR)

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Germany

IZA Institute of Labor Economics

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Bonn, 53072
Germany

Sebastian G. Kessing

Wissenschaftszentrum Berlin fuer Sozialforschung (WZB) - Market Processes and Governance ( email )

Reichpietschufer 50
D-10785 Berlin
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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