Bargaining Strength in Budgetary Processes

Abstract

Studies of government budget-making recurrently describe it as a bargaining process between `guardians' and `advocates'. Yet this observation has not been implemented in formal modelling of budgetary processes. This paper employs a Nash model to analyse local government budgeting. The model is implemented by assuming two different sets of assumptions about the conflict points. The paper evaluates the explanatory power of the two interpretations by estimating the models on a cross-sectional time-series dataset from Norwegian counties. Finally, we examine the impact of institutional procedures on bargaining power. The paper defines the bargaining parameters of an asymmetrical Nash model as endogenous variables, and estimates the impact of election years, long-term budgeting and the managerial style of budget-making. It is found that budgetary procedures and election cycles affect the bargaining strength of the negotiators.