Does Agency Competition Improve the Quality of Policy Analysis? Evidence from OMB and CBO Fiscal Projections

Abstract

Public management scholars often claim that agency competition provides an effective institutional check on monopoly authority, and hence, leads to improvement of administrative performance in public sector agencies. This logic was central for creating the Congressional Budget Office (CBO) in 975 to challenge the policy information provided by the Office of Management and Budget (OMB). We challenge this conventional wisdom by demonstrating that CBO has failed to enhance the quality of U.S. fiscal policy analysis on its own terms; nor has it spurred improvements in OMB’s performance. Our empirical results indicate that the quality of OMB’s fiscal projections has often deteriorated since the establishment of CBO as a rival bureau. We also show that both public and private information is being shared by these agencies to produce a similar caliber of task outputs. The broader implications of our study indicate that although politicians face incentives to employ agency competition in governmental settings, this type of bureaucratic strategy does not necessarily enhance the quality of administrative performance.