Simulation

In this section you can run simulations of the model.

The default simulations displayed below illustrate the main takeaway of this model. The only parameter that differs between the two panels is the fraction of the budget that the legislature allows the bureaucrat to rollover (\(\alpha\)). The left panel represent the status quo in most public organizations, where there are expiring budgets. The right panel represents complete roll-over, that is, the bureaucrat can transfer the unexpended budget to the next year without loosing any resources. The difference in both scenarios is striking: average expenditure (excluding year-end roll-over and year-end expenditure in inventories) is much lower when roll-over is allowed. Go ahead and try different parameters to see how the model behaves!

Download the code that runs the simulations

In the plots:

• The blue bars represent the fraction of the annual budget expended each month.
• The green bars represent the fraction of the annual budget that is roll-over to the next year.
• The orange bars represent the fraction of the annual budget expended in inventories at the end of the year.
• The black solid line represents the average share of the budget expended per month.
• The red dashed line represents a flat expenditure throughout the year (1/12).