Can Centralized Performance Budgeting Systems Be Useful For Line Ministries? Evidence From Chile

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March 6, 2019

Many governments that have implemented performance budgeting systems have followed a centralized, top-down approach that makes them foreign to the needs of line ministries. In this study, the author analyzes the case of Chile, which despite its top-down approach, is often regarded as successful. Our findings suggest that while top-down performance budgeting systems often fail to meet the needs of individual ministries and are prone to principal-agent issues, under certain conditions—such as involving third-party experts and having a professional civil service—the performance information from those systems might still be useful and/or might generate positive spillovers for line ministries.