Late Budgets
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Late Budgets. / Andersen, Asger Lau; Lassen, David Dreyer; Nielsen, Lasse Holbøll Westh.
Department of Economics, University of Copenhagen, 2010.Research output: Working paper › Research
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TY - UNPB
T1 - Late Budgets
AU - Andersen, Asger Lau
AU - Lassen, David Dreyer
AU - Nielsen, Lasse Holbøll Westh
N1 - JEL classification: D72, H11, H72, H83
PY - 2010
Y1 - 2010
N2 - The budget forms the legal basis of government spending. If a budget is not in place at the beginning of the fiscal year, planning as well as current spending are jeopardized and government shutdown may result. This paper develops a continuous-time war-of-attrition model of budgeting in a presidential style-democracy to explain the duration of budgetnegotiations. We build our model around budget baselines as reference points for loss averse negotiators. We derive three testable hypotheses: there are more late budgets, and they are more late, when fiscal circumstances change; when such changes are negative rather than positive; and when there is divided government. We test the hypotheses of the model using a unique data set of late budgets for US state governments, based on dates of budget approval collected from news reports and a survey of state budget o¢ cers for the period 1988-2007. For this period, we find 23 % of budgets to be late. The results provide strong support for the hypotheses of the model.
AB - The budget forms the legal basis of government spending. If a budget is not in place at the beginning of the fiscal year, planning as well as current spending are jeopardized and government shutdown may result. This paper develops a continuous-time war-of-attrition model of budgeting in a presidential style-democracy to explain the duration of budgetnegotiations. We build our model around budget baselines as reference points for loss averse negotiators. We derive three testable hypotheses: there are more late budgets, and they are more late, when fiscal circumstances change; when such changes are negative rather than positive; and when there is divided government. We test the hypotheses of the model using a unique data set of late budgets for US state governments, based on dates of budget approval collected from news reports and a survey of state budget o¢ cers for the period 1988-2007. For this period, we find 23 % of budgets to be late. The results provide strong support for the hypotheses of the model.
KW - Faculty of Social Sciences
KW - politisk økonomi
KW - government budgeting
KW - state government
KW - presidential democracies
KW - political economy
KW - fiscal stalemate
KW - war of attrition
M3 - Working paper
BT - Late Budgets
PB - Department of Economics, University of Copenhagen
ER -
ID: 19436201