NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Separation of Powers and the Budget Process

Gene M. Grossman, Elhanan Helpman

NBER Working Paper No. 12332
Issued in June 2006
NBER Program(s):   PE   POL

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.

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Document Object Identifier (DOI): 10.3386/w12332

Published: Grossman, Gene M. & Helpman, Elhanan, 2008. "Separation of powers and the budget process," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 407-425, April. citation courtesy of

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