Agencies and Appropriations.

Abstract

Federal agencies operate under conditions of uncertainty, of many types. In this dissertation, I examine how agencies make trade-offs between financial security and policy goals in order to protect themselves from political uncertainties. I develop a dynamic, discrete choice model of stochastic control of appropriations (the legal process by which agencies are granted budgets) to study the trade-offs made and the strategies used to protect policy goals. I find that agencies follow a strategy of preserving status quo policies. Agencies may prefer to increase output, but increasing budgets will be used to pad agencies' operating budgets, instead of increasing output, in order to protect current policies. This pattern is increasingly true as appropriations to an agency increase, to the point that agencies appear entirely unresponsive to changes in appropriations.