Political and economic influences on the bureaucratic allocation of federal funds: The case of Urban Development Action Grants

Abstract

The distributive theory of politics predicts that federal budget allocations will be responsive to the committee position of congressmen and their majority/minority party status. But such political allocations are less likely where bureaucrats rather than legislators make the allocative decisions. In such cases we must take into account bureaucratic motivations as well. Niskanen's bureaucratic budget maximization theory emphasizes such bureaucratic maximands and the efficient production of output or activity by the budget constrained bureau. In this paper the two theories are tested using data from the Urban Development Action Grant program, a capital subsidy program operated by the Department of Housing and Urban Development. A set of political and bureaucratic decision criteria is employed as independent variables in a series of logit and Tobit models in order to predict the likelihood of projects being funded and the amounts they will receive. The political criteria are not significant in any specifications, but the bureaucratic criteria suggest an investment-maximizing, risk-avoidance strategy on the part of HUD bureaucrats. Thus the results support the Niskanen theory, but do not support the distributive theory.