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Do Expiring Budgets Lead to Wasteful Year-End Spending? Evidence from Federal Procurement

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  • Jeffrey B. Liebman
  • Neale Mahoney

Abstract

Many organizations have budgets that expire at the end of the fiscal year and may face incentives to rush to spend resources on low-quality projects at year's end. We test these predictions using data on procurement spending by the US federal government. Spending in the last week of the year is 4.9 times higher than the rest-of-the-year weekly average, and year-end information technology projects have substantially lower quality ratings. We also analyze the gains from allowing agencies to roll over unused funds into the next fiscal year.

Suggested Citation

  • Jeffrey B. Liebman & Neale Mahoney, 2017. "Do Expiring Budgets Lead to Wasteful Year-End Spending? Evidence from Federal Procurement," American Economic Review, American Economic Association, vol. 107(11), pages 3510-3549, November.
    • Handle: RePEc:aea:aecrev:v:107:y:2017:i:11:p:3510-49
    Note: DOI: 10.1257/aer.20131296
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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