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Time Consistency and Bureaucratic Budget Competition

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  • Kai A. Konrad
  • Sebastian G. Kessing

Abstract

High employment protection in the public sector results in strategic over‐employment if government divisions compete for budgets in a dynamic setting. Bureaucrats who are interested in maximising their divisions’ output employ excess labour, since this induces the sponsor to provide complementary inputs in the future. Restrictions on hiring decisions in the public sector can be regarded as provisions to reduce strategic hiring. We also provide evidence from a survey of decision makers in a public sector bureaucracy with very high employment protection. The results confirm that decision makers are aware of the strategic effects of their hiring decisions on budget allocation.

Suggested Citation

  • Kai A. Konrad & Sebastian G. Kessing, 2008. "Time Consistency and Bureaucratic Budget Competition," Economic Journal, Royal Economic Society, vol. 118(525), pages 1-15, January.
    • Handle: RePEc:wly:econjl:v:118:y:2008:i:525:p:1-15
    DOI: 10.1111/j.1468-0297.2007.02101.x
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    Cited by:

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    2. Marcus Drometer, 2012. "Bureaucrats and short-term politics," Public Choice, Springer, vol. 151(1), pages 149-163, April.
    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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    More about this item

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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