Working Paper: NBER ID: w19481
Authors: Jeffrey B. Liebman; Neale Mahoney
Abstract: 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 U.S. 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.
Keywords: federal procurement; year-end spending; budget authority; wasteful spending
JEL Codes: H0; H5; H56; H57; H61; L0; L2; L24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Expiration of budgets (H61) | Surge in spending during the last week of the fiscal year (H62) |
| Allowing agencies to roll over unused funds (H61) | Mitigate spike in spending and improve project quality (O22) |
| Surge in spending during the last week of the fiscal year (H62) | Drop-off in quality of projects (L15) |