An Empirical Analysis of the Effects of Performance-Based Budgeting on State Government Expenditures

48 Pages Posted: 10 Dec 2011 Last revised: 9 Apr 2012

See all articles by Yanxia Qi

Yanxia Qi

China University of Petroleum - School of Business Administration, Department of Accounting and Finance

Yaw M. Mensah

Rutgers Business School - Newark & New Brunswick

Date Written: April 8, 2012

Abstract

This paper examines the economic effects of the adoption and implementation of performance-based budgeting (PBB) at the state government level. We examine the association between the implementation of PBB and aggregate state expenditures from the General Fund and Other State Funds, and further analyze whether PBB affects combined functional spending: Future-oriented expenditures (Public Education, Higher Education, and Transportation), Social expenditures (Public Aid, and Public Health/Medicaid), Public safety expenditures (Correctional Facilities) and Other expenditures. We find that the implementation of PBB is negatively associated with total expenditures from General Fund and positively associated with total expenditures from Other State Funds. The effect of PBB on combined functional spending is significantly negative for Future-oriented expenditures and Socially-oriented expenditures from the General Fund, but there is a positive relationship between PBB and Future-oriented expenditures (transportation projects) and Socially-oriented expenditures from dedicated Other State Funds. We conclude that PBB is effective in getting state governments to reorganize their spending priorities.

Keywords: Economic Effects, Future-Oriented Spending, Performance-Based Budgeting, Social Spending, State Government Expenditures

JEL Classification: H72, H75, M49

Suggested Citation

Qi, Yanxia and Mensah, Yaw M., An Empirical Analysis of the Effects of Performance-Based Budgeting on State Government Expenditures (April 8, 2012). Available at SSRN: https://ssrn.com/abstract=1970079 or http://dx.doi.org/10.2139/ssrn.1970079

Yanxia Qi

China University of Petroleum - School of Business Administration, Department of Accounting and Finance ( email )

18 Fuxue Road, Changping
Beijing, 102249
China

Yaw M. Mensah (Contact Author)

Rutgers Business School - Newark & New Brunswick ( email )

100 Rockafeller Road
Piscataway, NJ 08854
United States
848.445.4369 (Phone)
732.445.0351 (Fax)

HOME PAGE: http://business.rutgers.edu

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