A Theory of Government Procrastination∗

We present a theory to explain government procrastination as a consequence of presentbias resulting from the political uncertainty in a two-party political system. We show that under a two-party political system the party in office tends to be present-biased. This may lead to inefficient procrastination of socially beneficial projects that carry upfront costs but yield long-term benefits. However, procrastination is often not indefinite even as we consider an infinite-horizon game. There exist equilibria in which the project is carried out, and in many cases completed in finite time. The procrastination problem tends to get more serious as the cost of the project gets higher. When the cost is low, there is no procrastination problem. When the cost is high, the project can be procrastinated indefinitely, though there may co-exist equilibria in which the project is implemented gradually. When the cost is intermediate, there is an array of equilibria, all characterized by some form of procrastination. JEL Classification: C70, D11, D60, D72, D78, D91