Budget-maximizing governmental agencies: An empirical test

Niskanen's theory of government budgeting, involving powerful agencies interested in maximizing their budgets through bargaining with a weak, poorly informed governmental ‘Sponsor’, has received wide recognition. This paper presents the first direct empirical tests of Niskanen's ideas. One implication of Niskanen's model of budgeting is that the demand for public services will appear to be elastic. Niskanen's model also implies restrictions on the elasticity of the derived demand for labor in the public sector. Neither set of predictions is supported by existing empirical research on government activity.