Does More Information Improve Budget Allocation? Evidence and Lessons from Performance-Oriented Budgeting in Korea

This paper examines whether the provision of performance information in budgetary process can change the budget allocation by analyzing results from the introduction of performanceoriented budgeting in Korea. (1) After controlling other factors, this paper finds strong correlations between performance information and budget allocation at every stage of budgetary process. (2) It also finds suggestive evidence that the provision of performance information changed budget allocation compared to the one without performance information. (3) Finally, even though it is not easy to find conclusive evidence whether performance-based budgeting improved budget allocation, this paper provides suggestive evidence that performance-based budgeting increased variations of each program’s budget change, which implies moving away from the practice of incremental budgeting.