Budget Processes: Theory and Experimental Evidence

29 Pages Posted: 26 Sep 2006  

Karl-Martin Ehrhart

University of Karlsruhe

Jürgen von Hagen

University of Bonn - Institute of Economic Policy; Centre for Economic Policy Research (CEPR)

Claudia Keser

University of Goettingen (Gottingen)

Roy Gardner

Indiana University Bloomington - Department of Economics; Indiana University Purdue University Indianapolis (IUPUI) - Department of Economics

Date Written: September 19, 2006

Abstract

This paper studies budget processes, both theoretically and experimentally. We compare the outcomes of bottom-up and top-down budget processes. It is often presumed that a top-down budget process leads to a smaller overall budget than a bottom-up budget process. Ferejohn and Krehbiel (1987) showed theoretically that this need not be the case. We test experimentally the theoretical predictions of their work. The evidence from these experiments lends strong support to their theory, both at the aggregate and the individual subject level.

Keywords: budget processes, voting equilibrium, experimental economics

JEL Classification: H61, C92

Suggested Citation

Ehrhart, Karl-Martin and von Hagen, Jürgen and Keser, Claudia and Gardner, Roy, Budget Processes: Theory and Experimental Evidence (September 19, 2006). CAEPR Working Paper No. 2006-009. Available at SSRN: https://ssrn.com/abstract=932692 or http://dx.doi.org/10.2139/ssrn.932692

Karl-Martin Ehrhart

University of Karlsruhe ( email )

Postbox
76128 Karlsruhe, DE 76128
Germany

Jürgen Von Hagen

University of Bonn - Institute of Economic Policy ( email )

Adenauerallee 24
D-53113 Bonn
Germany

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Claudia Keser

University of Goettingen (Gottingen) ( email )

Platz der Göttinger Sieben 3
Göttingen, 37073
Germany

Roy John Gardner (Contact Author)

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States

Indiana University Purdue University Indianapolis (IUPUI) - Department of Economics ( email )

Bloomington, IN 47405
United States
812-855-6383 (Phone)
812-855-3736 (Fax)

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