Abstract
Who, if anyone, controls the massive government bureaucracy responsible for the elaboration, implementation, and enforcement of laws and executive orders? Typical managerial techniques---screening, reward, and punishment---are hampered by the rules of the civil service system. All but the most senior bureaucrats are hired and promoted according a non-political examination and review system, and most are protected from punishment or termination by tenure. I argue that the executive can control the bureaucracy by creating competition for budget allocations within and between agencies, a process I call strategic budgeting. These incentives work under realistic assumptions: highly imperfect monitoring, bounded rationality of executives and bureaucrats, ideological motivations, and professional norms are all a part of the model. I test the predictions of my theory in the laboratory and in data from the American states, finding evidence to confirm that strategic budgeting is an effective strategy for bureaucratic management.
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