Social Choice and Welfare

, Volume 36, Issue 3–4, pp 565–589 | Cite as

Bargaining over the budget

Article

Abstract

This article presents a theory of government expenditure and identifies how an inefficient government budget is shaped by its initial size and allocation. Assuming that the parties in the legislative body agree with the optimal size of a government budget but have conflict of interests over its allocation, we show that, if the initial budget size is sufficiently large and the initial allocation is sufficiently unequal, in equilibrium the budget size is greater than what it would be had the initial budget size been sufficiently small.

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Copyright information

© Springer-Verlag 2010

Authors and Affiliations

  1. 1.Department of Managerial Economics and Decision Sciences (MEDS), Kellogg School of ManagementNorthwestern UniversityEvanstonUSA
  2. 2.Ford Motor Company Center for Global Citizenship, Kellogg School of ManagementNorthwestern UniversityEvanstonUSA
  3. 3.Department of Economics and FinanceCity University of Hong KongKowloonHong Kong

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