(forthcoming) The Scandinavian Journal of Economics
Many governments around the world exhibit heightened end of the fiscal year spending. These end of fiscal year spending spikes often concern policy makers due to their tendency to result in lower quality spending. This paper uses UK data to offer evidence against the precautionary savings explanation for spending spikes. An alternate explanation is offered with procrastination driving heightened end of fiscal year spending. A new technique of time variant budgetary taxes is calibrated to the model and shown to be effective for smoothing spending and improving spending efficiency throughout the fiscal year.
JEL Codes: H11, H50, H61
Keywords: Government spending, fiscal year distortions
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