The dissertation investigates, based on experimental and time series studies, in what way and to what extent three heuristics identified in the budgetary and bounded rationality literature – the use of last year’s budget, experience, and comparisons – affect the process and output of public budgeting. The findings show that if spending was relatively high last year, politicians will have lower spending preferences this year and vice versa, but also that this relationship weakens as attention to a spending area increases. A similar stabilizing relationship is found in the budget process where last year’s budget works well as a heuristic for coordination between decision-makers but becomes less prevalent if more information is available. The dissertation also demonstrates that budgeting is experiential as politicians adjust the current budget in response to experiences of under- or overspending last year. Other evidence shows that policies of others have substantial effects on a municipality’s budget level, and that neighbors are much more influential in that regard than those within a common benchmarking network. The dissertation makes two important contributions to our understanding of how politicians make budgetary prioritization. First, it shows, by opening up the black box of individual-level decision-making, that use of last year’s budget as a heuristic is not only a macro-level phenomenon. Second, it shows that two overlooked budgeting heuristics – experience and comparisons – have a substantial effect on the decisional output of the budgetary process.
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