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The "Power of the Purse" and Its Implications for Bureaucratic Policy-Making

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  • Ting, Michael M

Abstract

A dilemma of the "Power of the Purse" is that cutting an agency's budget may make a desired policy infeasible. I examine the implications of this dilemma with a repeated game in which a bureau chooses unobservable policies after a legislature sets its budget. The bureau is work-averse and has its own policy preferences and therefore may cheat, but the legislature may perform an audit to recover "slack" funds. A main result is that if the legislature desires a higher policy level than the agency, then it faces a trade-off between "good" but wasteful policies and "bad" but efficient ones. Copyright 2001 by Kluwer Academic Publishers

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  • Ting, Michael M, 2001. "The "Power of the Purse" and Its Implications for Bureaucratic Policy-Making," Public Choice, Springer, vol. 106(3-4), pages 243-274, March.
    • Handle: RePEc:kap:pubcho:v:106:y:2001:i:3-4:p:243-74
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    Cited by:

    1. Grossman, Gene M. & Helpman, Elhanan, 2008. "Separation of powers and the budget process," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 407-425, April.
    2. Fuhai Hong & Tat-How Teh, 2019. "Bureaucratic Shirking, Corruption, and Firms’ Environmental Investment and Abatement," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(2), pages 505-538, October.
    3. Peter K. Hazlett & Chandler S. Reilly, 2023. "Bureaucratic rent creation: the case of price discrimination in the market for postsecondary education," Constitutional Political Economy, Springer, vol. 34(2), pages 226-256, June.

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