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Separation of Powers and the Budget Process

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  • Helpman, Elhanan
  • Grossman, Gene

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 earmarked 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 executive's constituency is more narrow than that of the powerful legislators.

Suggested Citation

  • Helpman, Elhanan & Grossman, Gene, 2006. "Separation of Powers and the Budget Process," CEPR Discussion Papers 5745, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5745
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    Cited by:

    1. Leandro De Magalhães & Lucas Ferrero, 2015. "Separation of powers and the tax level in the U.S. states," Southern Economic Journal, John Wiley & Sons, vol. 82(2), pages 598-619, October.
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    3. Alesina, A. & Passalacqua, A., 2016. "The Political Economy of Government Debt," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2599-2651, Elsevier.
    4. Ionita Predescu Lorena & Radu Florin & Tabirca Alina Iuliana, 2011. "Needs Of Local Sustainable Development," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 91-97, December.
    5. Benjamin E. Diokno, 2010. "Philippine fiscal behavior in recent history," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 47(1), pages 39-87, June.
    6. Alston, Lee J. & Mueller, Bernardo & Melo, Marcus André & Pereira, Carlos, 2010. "The Political Economy of Productivity in Brazil," IDB Publications (Working Papers) 1123, Inter-American Development Bank.
    7. Benjamin E. Diokno, 2008. "The Philippines : Fiscal Behavior In Recent History," UP School of Economics Discussion Papers 200804, University of the Philippines School of Economics.
    8. Leandro De Magalhães & Lucas Ferrero, 2012. "Separation of Powers and the Size of Government in the U.S. States," The Centre for Market and Public Organisation 12/285, The Centre for Market and Public Organisation, University of Bristol, UK.
    9. Jeremy Jackson, 2013. "Tax earmarking, party politics and gubernatorial veto: theory and evidence from US states," Public Choice, Springer, vol. 155(1), pages 1-18, April.
    10. Thomas Braendle & Alois Stutzer, 2013. "Political selection of public servants and parliamentary oversight," Economics of Governance, Springer, vol. 14(1), pages 45-76, February.
    11. Leandro M. De Magalhães & Lucas Ferrero, 2009. "Budgetary Separation of Powers in the American States and the Tax Level: A Regression Discontinuity Design," The Centre for Market and Public Organisation 09/225, The Centre for Market and Public Organisation, University of Bristol, UK.
    12. Wyplosz, Charles & Krogstrup, Signe, 2006. "A Common Pool Theory of Deficit Bias Correction," CEPR Discussion Papers 5866, C.E.P.R. Discussion Papers.
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    More about this item

    Keywords

    Government spending; Fiscal policy; Pork-barrel politics; Comparative political economics;
    All these keywords.

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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