Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108610
Authors: 
Bowen, T. Renee
Chen, Ying
Eraslan, Hülya
Year of Publication: 
2012
Series/Report no.: 
Koç University-TÜSİAD Economic Research Forum Working Paper Series 1229
Abstract: 
Do mandatory spending programs such as Medicare improve efficiency? We analyze a model with two parties allocating a fixed budget to a public good and private transfers each period over an infinite horizon. We compare two institutions that differ in whether public good spending is discretionary or mandatory. We model mandatory spending as an endogenous status quo since it is enacted by law and remains in effect until changed. Mandatory programs result in higher public good spending; furthermore, they ex ante Pareto dominate discretionary programs when parties are patient, persistence of power is low, and polarization is low.
Subjects: 
budget negotiations
mandatory programs
dynamic bargaining
endogenous status quo
public goods
JEL: 
C73
D61
D78
Document Type: 
Working Paper

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