NBER

Laura Karpuska

Sao Paulo School of Economics - FGV.
R Itapeva 474, Sao Paulo, SP
01332-000
Sao Paulo - SP
Brazil
Tel: 55-11-37993350

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Sao Paulo School of Economics

NBER Working Papers and Publications

July 2020Bargaining over Mandatory Spending and Entitlements
with Marina Azzimonti, Gabriel P. Mihalache: w27595
Do mandatory spending rules improve social welfare? We analyze a dynamic political-economy model in which two parties disagree on the split of a fixed budget between public goods and private transfers. Under a mandatory spending rule, expenditures are governed by criteria set by enacted law, namely last year’s spending bill is applied in the current year unless successfully changed by a majority of policymakers. We model budget rules with an endogenous status quo and study the welfare implications of introducing entitlement programs. Entitlements depend on individual eligibility and participation and, hence, impose constraints on publicly-provided private goods and transfers. We emphasize that bargaining over entitlements is qualitatively different from bargaining over public goods provisi...

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