The president and asymmetric use of information

ABSTRACT

While presidents try to allocate resources to their interests in budgeting process, they have limited power to influence because the government budget is approved by the legislative body. This study investigates whether presidents asymmetrically use information on the efficiency of programs to allocate more resources to their interests. Specifically, I focus on leftover funds in the government reporting. Growing leftover funds indicate inefficiency of the programs as they are the results of lack of demand or operational problems in implementation. Using data from the Korean government, I find that the change of leftover funds of programs and the following year’s budget has a negative relation only when the change of leftover funds is negative, which suggests that the efficiency of the program improves. This phenomenon becomes more salient when the programs are related to the president’s political interests. This suggests that presidents allocate resources to the programs of their interests by asymmetrically using the information on efficiency. This study contributes to the extant literature by identifying one of the presidents’ tools to affect the budgeting process.

KEYWORDS:

• Budgeting
• left-over funds
• president
• federal spending

JEL CLASSIFICATION:

• H61
• H50

Disclosure statement

No potential conflict of interest was reported by the author.