Separation of Powers and the Budget Process

27 Pages Posted: 13 Jun 2006

See all articles by Gene M. Grossman

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); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Elhanan Helpman

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: June 2006

Abstract

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.

Keywords: government spending, fiscal policy, pork-barrel politics, comparative political economics

JEL Classification: H61,D78,H41

Suggested Citation

Grossman, Gene M. and Helpman, Elhanan, Separation of Powers and the Budget Process (June 2006). Harvard Institute of Economic Research Discussion Paper No. 2119. Available at SSRN: https://ssrn.com/abstract=908563 or http://dx.doi.org/10.2139/ssrn.908563

Gene M. Grossman

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

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Princeton University - Department of Economics ( email )

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

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Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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Elhanan Helpman (Contact Author)

Harvard University - Department of Economics ( email )

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United States
617-495-4690 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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