The ``Power of the Purse'' and its Implications for Bureaucratic Policy-Making
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- Ting, M.M. Public Choice (2001) 106: 243. doi:10.1023/A:1005288927750
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A dilemma of the ``Power of the Purse'' is thatcutting an agency's budget may make a desired policyinfeasible. I examine the implications of thisdilemma with a repeated game in which a bureau choosesunobservable policies after a legislature sets itsbudget. The bureau is work-averse and has its ownpolicy preferences and therefore may cheat, but thelegislature may perform an audit to recover ``slack''funds. A main result is that if the legislaturedesires a higher policy level than the agency, then itfaces a trade-off between ``good'' but wasteful policiesand ``bad'' but efficient ones.