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  3. American Economic Review
  4. November 2017
  5. Do Expiring Budgets Lead to Wasteful Year-End Spending? Evidence from Federal Procurement

Do Expiring Budgets Lead to Wasteful Year-End Spending? Evidence from Federal Procurement

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Abstract

Many organizations have budgets that expire at the end of the fiscal year and may face incentives to rush to spend resources on low-quality projects at year's end. We test these predictions using data on procurement spending by the US federal government. Spending in the last week of the year is 4.9 times higher than the rest-of-the-year weekly average, and year-end information technology projects have substantially lower quality ratings. We also analyze the gains from allowing agencies to roll over unused funds into the next fiscal year.

Citation

Liebman, Jeffrey B., and Neale Mahoney. 2017. "Do Expiring Budgets Lead to Wasteful Year-End Spending? Evidence from Federal Procurement." American Economic Review, 107 (11): 3510-49. DOI: 10.1257/aer.20131296

Additional Materials

JEL Classification

  • H57 National Government Expenditures and Related Policies: Procurement
  • H61 National Budget; Budget Systems