A New Approach for Testing Budgetary Incrementalism

Abstract

We present evidence suggesting that the widely used regression method for testing budgetary incrementalism (Davis, Dempster, and Wildavsky, 1966a, 1966b, 1971 is not suited for U.S. budgetary data that appear to be nonstationary. The method, moreover, cannot detect a nonincremental period following (or preceding) an incremental period. We offer an alternative method that is valid even in nonstationary cases. Our method exploits both the crosssectional and time-series characteristics of the budgetary data to identify statistically the occurrence of incremental decisions (counts) and to estimate incremental cycles for various agencies. More important, the method lends itself to explanatory hypotheses testing. We formulate a set of hypotheses about how various political and economic factors may affect incremental budgeting. We test these hypotheses using the estimated counts in a Poisson regression context. Our results suggest that the Democrats' control over the political process, a switch in the party controlling the White House or Congress, and presidential election year promises (and political vulnerabilities) all cause departures from incremental budgeting. The public pressure resulting from a persistently large deficit has a similar effect. This work may contribute to our understanding of legislative choice.

Creating Room for Manoeuvre: a Strategy to Generate Political Budget Cycles under Fiscal Rules

“…The literature shows that budget figures usually follow the incremental approach (see Dezhbakhsh et al. ). This means that as far as budgets are concerned, a particular year t figure depends to some extent on year t‐1 figure.…”

Budgetary support for police services in U.S. municipalities: Comparing political culture, socioeconomic characteristics and incrementalism as rival explanations for budget share allocation to police

“…Recently, another study in this area of budgetary practices and outcomes examined federal budgetary appropriations to 103 agencies between 1946 and 1996. Dezhbakhsh et al (2003) found that overall, incremental budgeting was the predominant pattern of decisionmaking observed. Only minor departures from this pattern occurred during presidential election years, and when Democrats controlled both houses in Congress (Dezhbakhsh et al, 2003).…”

“…The decision of "who gets what" is based primarily on the previous year's allocation. In most cases, each agency is allocated a similar increase or decrease in their departmental budgets, and the actual agency share of municipal budget remains highly stable over time (Bailey & O'Connor, 1975;Bozeman & Straussman, 1982;Dezhbakhsh, Tohamy, & Aranson, 2003;Lewis, 1984).…”

“…The theoretical basis for considering this type of decision-making process primarily derives from two highly regarded scholars, the Nobel laureate Herbert Simon and legendary figure Charles Lindblom (Dezhbakhsh et al, 2003). In his seminal work, "A Behavioral Model of Rational Choice," Herbert Simon (1955) argued that human decisionmaking processes are hardly "rational" in the sense that all possible avenues of action are assessed for their costs and benefits.…”

Contemporary developments in spatial econometrics modelling: the 14th International Workshop on Spatial Econometrics and Statistics, Paris 2015

“…Rios, Pascual, and Cabases (2017, in this issue) extend traditional spatial spillover models, applied to government spending policies in Spain, by including dynamic effects and endogenous and exogenous interaction effects. The justification for dynamic effects are closely linked the incremental budgetary assumption (Davis, Dempster, & Wildavsky, 1966;Dempster & Wildavsky, 1979;Simon, 1995;Dezhbakhsh, Tohamy, & Aranson, 2003). Accordingly, the paper compares not only own and neighbouring levels of expenditure but also past and future expenditures over time.…”