Budget-Making for Social Purposes

A theory of the budgetary process within public resource allocation has to recognize two basic properties of budgetary behavior and budgetary interaction: variation over time and program variation. Our results indicate that the hypothesis of program variation is worthy of effort, as we find different decision mechanisms operating in the six programs studied, which belong to different categories of public resource allocation. Variation over time is particularly difficult to accommodate within the framework of incrementalist notions: incremental decision rules imply structural stability over time slices. We find the opposite to be true in two of the program types analyzed, the transfer programs and the service programs. Bureaucratic programs may look incremental; however, that may only be an appearance, as a closer analysis of the data indicates that the decision mechanism involves the occurrence of shift-points or non-incremental changes. A theory of the public expenditure process has to take into account both incremental decision strategies and non-incremental ones, which requires an econometric methodology based on the possibility of structural variability. Such a methodology includes the use of both test statistics and estimation techniques suitable to the occurrence of structural variability.