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Discussion Paper Details

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Title: Budget Processes: Theory and Experimental Evidence

Author(s): Karl-Martin Ehrhart, Roy J Gardner, Claudia Keser and Jürgen von Hagen

Publication Date: January 2001

Keyword(s): Budget Processes, Experimental Economics and Structurally Induced Equilibrium

Programme Area(s): Public Economics

Abstract: This Paper studies budget processes, both theoretically and experimentally. We compare the outcomes of bottom-up and top-down budget processes. It is often presumed that a top-down budget process leads to a smaller overall budget than a bottom-up budget process. We show, using structurally induced equilibrium theory, that this need not be the case. To test the implications for budget processes of structurally induced equilibrium theory, we conduct a series of experiments. The evidence from these experiments supports the predictions of structurally induced equilibrium theory, both at the aggregate and at the individual subject level.

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Bibliographic Reference

Ehrhart, K, Gardner, R, Keser, C and von Hagen, J. 2001. 'Budget Processes: Theory and Experimental Evidence'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2661