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American Economic Journal: Economic Policy: Vol. 4 No. 4 (November 2012)

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Late Budgets

Article Citation

Andersen, Asger Lau, David Dreyer Lassen, and Lasse Holbøll Westh Nielsen. 2012. "Late Budgets." American Economic Journal: Economic Policy, 4(4): 1-40.

DOI: 10.1257/pol.4.4.1

Abstract

The budget forms the legal basis for government spending, and timely budgets, enacted before the new fiscal year, are an integral part of good governance. This paper examines the causes of late budgets using a unique dataset of budget completion dates for US state governments 1988-2007, constructed from news reports and state budget office surveys. We find 23 percent of state budgets to be late. We show that changing economic circumstances and divided government are the driving forces behind late budgets, which is consistent with a war-of-attrition bargaining model featuring budget baselines and preferences over deviations from such baselines. (JEL C78, D72, H61, H72)

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Authors

Andersen, Asger Lau (Danmarks Nationalbank)
Lassen, David Dreyer (U Copenhagen)
Nielsen, Lasse Holbøll Westh (Goldman Sachs International)

JEL Classifications

C78: Bargaining Theory; Matching Theory
D72: Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
H61: National Budget; Budget Systems
H72: State and Local Budget and Expenditures

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