Budgeting under Information Asymmetry: Evidence from Intergovernmental Transfers
P6-S146-1
Presented by: David Fortunato
Legislatures often find themselves at an informational disadvantage relative to the bureaucracies they fund to administer policy. We research the budgeting implications of these informational asymmetries by studying intergovernmental transfers by American state legislatures to substate (county and municipal) agencies with special attention to police. Building on theoretical models of delegation we argue that larger informational asymmetries will lead to larger state-to-substate transfers, all else equal. To test our central hypothesis, we leverage variation in the informational resources of state legislatures across units and over time and compare these resource endowments to intergovernmental transfer, finding that better resourced legislatures—who presumably face smaller informational asymmetries to substate agencies—appropriate significantly smaller intergovernmental transfers, all else equal. The argument and analyses imply that better resourced legislatures are better able to contain profligate spending.
Keywords: interbranch politics, legislative capacity, legislative institutions, principal agent model, public spending