Budgetary Punctuations: A Fiscal Management Perspective

Abstract

Although the development of punctuated equilibrium theory makes broad reference to the bureaucratic procedures that regulate budgetary decision making and makes reasonable assumptions about the influence of those procedures on the dynamic of resource allocation, little is known about how the specific mechanisms work. This has led to a call to understand the processes that cause friction in greater detail. This study examines how budgetary output patterns may be influenced by governments' strategic fiscal choices. Using an approach that highlights the roles of various fiscal policy-making processes, we found significant deviations of budgetary output patterns in capital projects, restricted funds, and entitlement spending, thus signifying the influence of fiscal practices on resource allocation decisions. We further examined how fiscal influences may be realized in the political process of democratization in Hong Kong. By examining legislative filibuster cases related to capital projects, we found evidence associating democratization with greater institutional friction and consequently with larger budgetary output punctuations.