Budget Processes: Theory and Experimental Evidence

29 Pages Posted: 26 Sep 2006

See all articles by Karl-Martin Ehrhart

Karl-Martin Ehrhart

Karlsruhe Institute of Technology (KIT)

Jürgen von Hagen

University of Bonn - Institute of Economic Policy; Centre for Economic Policy Research (CEPR)

Claudia Keser

University of Goettingen (Göttingen)

Roy Gardner

Indiana University Purdue University Indianapolis (IUPUI) - Department of Economics; Indiana University Bloomington - Department of Economics

Date Written: September 19, 2006

Abstract

This paper studies budget processes, both theoretically and experimentally. We compare the outcomes of bottom-up and top-down budget processes. It is often presumed that a top-down budget process leads to a smaller overall budget than a bottom-up budget process. Ferejohn and Krehbiel (1987) showed theoretically that this need not be the case. We test experimentally the theoretical predictions of their work. The evidence from these experiments lends strong support to their theory, both at the aggregate and the individual subject level.

Keywords: budget processes, voting equilibrium, experimental economics

JEL Classification: H61, C92

Suggested Citation

Ehrhart, Karl-Martin and von Hagen, Jürgen and Keser, Claudia and Gardner, Roy John and Gardner, Roy John, Budget Processes: Theory and Experimental Evidence (September 19, 2006). CAEPR Working Paper No. 2006-009, Available at SSRN: https://ssrn.com/abstract=932692 or http://dx.doi.org/10.2139/ssrn.932692

Karl-Martin Ehrhart

Karlsruhe Institute of Technology (KIT) ( email )

Kaiserstraße 12
Karlsruhe, Baden Württemberg 76131
Germany

Jürgen Von Hagen

University of Bonn - Institute of Economic Policy ( email )

Adenauerallee 24
D-53113 Bonn
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Claudia Keser

University of Goettingen (Göttingen) ( email )

Platz der Göttinger Sieben 3
Göttingen, 37073
Germany

Roy John Gardner (Contact Author)

Indiana University Purdue University Indianapolis (IUPUI) - Department of Economics ( email )

Bloomington, IN 47405
United States
812-855-6383 (Phone)
812-855-3736 (Fax)

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States

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