Organizational design and its consequences for administrative reform: Historical lessons from the U.S. Budget and Accounting Act of 1921

Abstract

AbstractThe landmark U.S. Budget and Accounting Act of 1921 (BAA) instituted a series of administrative reforms that proponents claimed would improve budgetary control, stability, and coherence. We maintain that the compatibility of governance structures between agency and system levels is critical for understanding why these administrative centralization efforts were successful in achieving these aims for some federal agencies but not others. The BAA reforms impact on budgetary outcomes is evaluated using panel data on major U.S. federal agencies between 1894 and 1940. Applying semiparametric heterogeneous treatment estimation techniques, we find compelling support that administrative centralization of the federal budgetary process enhanced budget stability and coherence for executive departments while resulting in a lower caliber of budgetary performance for independent agencies. These findings imply that system‐level administrative centralization efforts may be effective only when public agencies are structurally amenable to such reforms.