Bargaining Over a New Welfare State

38 Pages Posted: 15 Sep 2010

See all articles by Alessandro Bonatti

Alessandro Bonatti

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Kaj Thomsson

Maastricht University - Department of Economics

Date Written: October 16, 2007

Abstract

The goal of this paper is twofold: First, to develop an estimable model of legislative politics in the US Congress, second, to provide a greater understanding of the objectives behind the New Deal. In the theoretical model, the distribution of federal funds across regions of the country is the outcome of bargaining game in which the President acts as the agenda-setter and Congress bargains over the final shape of the spending bill. For any given preferences (of the President) and distribution of seats in Congress, the model delivers a unique predicted allocation. Combined with data on New Deal programs, this is used to estimate the objectives of the Roosevelt administration. The results indicate that economic concerns for relief and recovery, though not necessarily for fundamental reform and development, largely drove New Deal spending. Political concerns also mattered, but more on the margin.

Keywords: Political Economy, LegislativeBargaining, New Deal, US Congress, Public Spending

JEL Classification: C78, D72, H11, H50, N42, P48

Suggested Citation

Bonatti, Alessandro and Thomsson, Kaj, Bargaining Over a New Welfare State (October 16, 2007). MIT Sloan Research Paper No. 4839-10; IFN Working Paper No. 713. Available at SSRN: https://ssrn.com/abstract=1677433 or http://dx.doi.org/10.2139/ssrn.1677433

Alessandro Bonatti

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Kaj Thomsson (Contact Author)

Maastricht University - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

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