Three essays on state budget rules and procedures

Abstract

In Common pool models fiscal outcomes are determined by the decision-making rule that is used to aggregate conflicting interests into a single budget. The rules according through which the budget is prepared, approved and carried out can affect spending bias. The idea is that the common pool problem may manifest itself during different phases of the budgetary process. This thesis analyzes a model in which the Ministry of Finance internalizes the Common pool externality of the budget. From an institutional point of view this assumption is realistic because it takes into account the budget institutional equilibrium. Formally, this is reflected in the assumption that the Ministry of finance maximizes his utility function à la Stackelberg. In Stackelberg equilibrium leader’s expenditures choice is grater than in Cournot-Nash result, while the deficit bias is lower due to agenda setting power over spending ministries. [edited by Author]