Do Expiring Budgets Lead to Wasteful Year-End Spending? Evidence from Federal Procurement | Zendy

Jeffrey B. Liebman | Zendy; Neale Mahoney | Zendy

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Do Expiring Budgets Lead to Wasteful Year-End Spending? Evidence from Federal Procurement

Author(s) -

Jeffrey B. Liebman,

Neale Mahoney

Publication year - 2017

Publication title -

american economic review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 16.936

H-Index - 297

eISSN - 1944-7981

pISSN - 0002-8282

DOI - 10.1257/aer.20131296

Subject(s) - fiscal year , procurement , incentive , government (linguistics) , government spending , quality (philosophy) , business , rest (music) , lead (geology) , government procurement , economics , finance , marketing , welfare , microeconomics , market economy , medicine , linguistics , philosophy , cardiology , epistemology , geomorphology , geology

Many organizations have budgets that expire at the end of the fiscal year and may face incentives to rush to spend resources on low-quality projects at year's end. We test these predictions using data on procurement spending by the US federal government. Spending in the last week of the year is 4.9 times higher than the rest-of-the-year weekly average, and year-end information technology projects have substantially lower quality ratings. We also analyze the gains from allowing agencies to roll over unused funds into the next fiscal year. (JEL H57, H61)

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