Bureaucratic Behavior: Budget Cuts, Imperfect Information, and the 2013 Sequester
2014; RELX Group (Netherlands); Linguagem: Inglês
10.2139/ssrn.2421297
ISSN1556-5068
Autores Tópico(s)Fiscal Policies and Political Economy
ResumoIn order to advance the economic theory on bureaucrats and bureaucracies, this study models the behavior of a bureaucrat who has imperfect information regarding his financier. This model reveals that if a bureaucrat is forced to cut spending, he will trim nonproductive "discretionary profit" spending, but he will also decrease output by cutting factor input expenditures. The bureaucrat will prefer to cut labor hours rather than wages. This study then explores the 2013 federal sequester and analyzes federal agencies' actions in the context of the model. This study finds that Congress and many federal departments jointly acted in line with the model predictions. Federal bureaus cut unproductive and productive expenditures. Factor input cuts came largely from furloughs and hiring freezes (labor cuts) because Congress prohibited federal pay rate cuts.
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