Unused funds and budget decision: Rationality or Bureaucratic Self Interest?

• 발행기관: 한국재정학회(구 한국재정·공공경제학회)
• 저자명: Bong Hwan Kim Hye Jung Kim
• 간행물 정보: 『한국재정학회 학술대회 논문집』2015년도 추계학술대회 논문집, 1~23쪽, 전체 23쪽
• 주제분류: 경제경영 > 경제학
• 파일형태: PDF
• 발행일자: 2015.09.30

영문 초록

Most government departments use budgeting to plan out not only their expenditures but also the programs they will pursue during that fiscal year. The fixed budget serves as an overarching plan for the department. When there is an inefficiency in the department’s operation, glaring discrepancies between the budget and the closing statements will inevitably occur. Thus, the information provided in the closing statement is a good indicator for the department's performance, and these information must be utilized when planning for the next year’s budget. Among the many information the closing statement provides, unused funds is particularly important, since it indicates that the department has failed to pursue a previously planned program. High ratio of unused funds to budget reasonably indicates that the department is spending the funds insufficiently, and that its budget needs to be adjusted. However, as with most things that are done by humans, rational decisions don’t always happen. Depending on the impact unused funds have on the next year’s budget, we would be able to see whether the government workers employ rational decision making procedures. We predict that if the unused funds and the next year’s budget have a negative relationship, then that would serve as evidence for the use of rational decision making process within the government. A positive or no relationship would indicate that the budgeting process lacks rationality and is more focused on human relationships. We test these predictions using data on procurement spending by the South Korean federal government. Using data on South Korea’s Ministry of land, infrastructure, and transportation from 2007 through 2013, we analyzed a regression model design to observe the relationship between unused funds and the upcoming year’s budget. Furthermore, we test whether these relationships are strengthened or weakened based on the administration’s priority. We observed that budget’s growth rate and previous year’s unused fund have a negative relation when change in unused fund is negative. However, we saw no relation between budget’s growth rate and unused funds, when unused fund is increasing. This suggests that the budgeting process is driven by bureaucratic interests rather than rational decision making process. We further found that this negative relation between budget’s growth rate and last year’s unused fund is strengthened for the projects fall under the set of prioritized programs listed by the president at the beginning of his term.

목차

1. Introduction

2. Hypotheses Development

3. Data and Research Design

4. Empirical Results

5. Conclusion

키워드

Budget theory Budget Unused Funds Public Choice Bureaucracy