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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 U.S. 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.

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  • Jeffrey B. Liebman & Neale Mahoney, 2013. "Do Expiring Budgets Lead to Wasteful Year-End Spending? Evidence from Federal Procurement," NBER Working Papers 19481, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:19481
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    1. repec:mth:ijafr8:v:8:y:2018:i:2:p:118-125 is not listed on IDEAS
    2. Jean‐Noël Barrot & Ramana Nanda, 2020. "The Employment Effects of Faster Payment: Evidence from the Federal Quickpay Reform," Journal of Finance, American Finance Association, vol. 75(6), pages 3139-3173, December.
    3. Hebous, Shafik & Zimmermann, Tom, 2021. "Can government demand stimulate private investment? Evidence from U.S. federal procurement," Journal of Monetary Economics, Elsevier, vol. 118(C), pages 178-194.
    4. Jens Dietrichson & Lina Ellegård, 2015. "Institutions improving fiscal performance: evidence from Swedish municipalities," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(5), pages 861-886, October.
    5. RAITERI Emilio, 2015. "A time to nourish? Evaluating the impact of innovative public procurement on technological generality through patent data," Cahiers du GREThA (2007-2019) 2015-05, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    6. Stephen J. Terry, 2023. "The Macro Impact of Short‐Termism," Econometrica, Econometric Society, vol. 91(5), pages 1881-1912, September.
    7. Stuart Baumann, 2019. "Putting It Off for Later: Procrastination and End of Fiscal Year Spending Spikes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(2), pages 706-735, April.
    8. Jean Barrot & Ramana Nanda, 2016. "Can Paying Firms Quicker Affect Aggregate Employment?," Working Papers id:11119, eSocialSciences.
    9. Fitzenberger, Bernd & Furdas, Marina & Sajons, Christoph, 2016. "End-of-year spending and the long-run employment effects of training programs for the unemployed," ZEW Discussion Papers 16-084, ZEW - Leibniz Centre for European Economic Research.
    10. Stuart Baumann, 2015. "Putting it off for later," Edinburgh School of Economics Discussion Paper Series 260, Edinburgh School of Economics, University of Edinburgh.
    11. Raiteri, Emilio, 2018. "A time to nourish? Evaluating the impact of public procurement on technological generality through patent data," Research Policy, Elsevier, vol. 47(5), pages 936-952.
    12. Spagnolo, Giancarlo & Decarolis, Francesco & Iossa, Elisabetta & Mollisi, Vincenzo & Giuffrida, Leonardo, 2016. "Buyer Quality and Procurement Outcomes: Explorative Evidence From the US," SITE Working Paper Series 41, Stockholm School of Economics, Stockholm Institute of Transition Economics.

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    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • L0 - Industrial Organization - - General
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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