The myth of the allocative inefficiency of parliamentary amendments

Abstract:

Parliamentary amendment appropriations are usually associated with inefficient use of public resources, as they allow for targeted benefits while the costs are dispersed throughout society. This essay adds that the legislator’s choices and its consequences can be depicted by the prisoner’s dilemma and the tragedy of commons. Conversely, some studies highlight that these initiatives improve the democratic system, mentioning benefits such as responsiveness to local demand, transparency, and accountability. To reconcile both perspectives, drawing on the contributions from fiscal federalism theory, the paper presents a model which incorporates the rigidities inherent to legislative procedures aiming to demonstrate that budgetary decentralization can spur social welfare gains. Notably, in an environment characterized by uncertainty and asymmetric information, the practice promotes higher levels of social welfare in comparison to allocative decision-making by central government.

Keywords:
Parliamentary amendments; Efficiency; Responsiveness; Social welfare