Abstract

Bureaucratic Behavior Modeled by Reduced-Rank Regression: The Case of Expenditures from the Soviet State Budget

John P. Burkett

Institute for the Study of International Aspects of Competition

Working Paper 96-1

A bureaucratic hierarchy compresses information flowing upward and disaggregates directives passing downward, thus making itself amenable to modeling by reduced-rank regression. Applying this technique to the Soviet government, we find that about eight latent variables are required to characterize the mapping of predetermined variables into a vector of budgetary expenditures. The latent variables can be interpreted as targets for expenditures in high-priority sectors.

JEL classification: C5, H5, P35

Key words: bureaucratic behavior, reduced-rank regression, Soviet economy, public finance.