Emory Report
September 7, 2004
Volume 57, Number 03


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September 7, 2004
Dr. Dezhbakhsh goes to Washington for GAO

BY eric rangus

Many professors take sabbatical time to finish a book or visit another university to teach a class. Hashem Dezhbakhsh wanted an entirely different experience. He spent his 2003–04 sabbatical at the General Accountability Office (GAO) in Washington.

“The GAO is a wonderful place for people who do policy-oriented research,” said Dezhbakhsh, a newly promoted professor of economics. The department’s director of undergraduate studies, Dezhbakhsh also is acting department chair, so he isn’t lacking for activity upon his return to Emory.

Dezhbakhsh spent almost nine months (mid-August 2003 to April 2004) working not only on his own research but contributing to GAO work. He played a role in the completion of two prominent studies: a tracking of the relationship between the performance of government programs and their budgets; and a study on whether the mergers of several oil companies in the 1990s had an effect on gas prices.

Performance-based budgeting was an idea that first came about in 1950 but didn’t really develop legs until the Clinton administration. When George W. Bush took office, more reforms were instituted, and now there are enough data to determine whether performance of discretionary programs affects budget allocation (mandated programs, such as Social Security, were not studied).

“On one side you have the public, which you can argue would like to see some accountability from government,” said Dezhbakhsh, who had been doing some of his own research on budgeting before going to the GAO (which until recently had been known as the General Accounting Office). “Then you have the bureaucrats, who probably are happy with the status quo. They don’t want additional competition, they don’t want substantial scrutinizing, and perhaps many of them don’t like the idea of having their funding linked to how well they do. Then you have the policy makers.

“So you can look at it as a three-player game among the public that wants it, the bureaucrats who don’t and the politicians. Politicians cannot come out and say they don’t want it. For a long time they have introduced legislation suggesting they really want to have increased accountability, but at the same time, funding is a source of power. When you try to share power, you see some tension. So, they may not be too eager to give up that power.”

After studying the data, Dezhbakhsh found a relationship, but not a particularly strong one. The effect is more prevalent for small programs, and budgeting is used more frequently to penalize programs than to reward them.

“There is a compromise,” he said. “You start with the smaller programs and apply budgeting in a punitive fashion rather than as a reward. It’s less costly to penalize the weaker than to reward the stronger programs.”

He recently completed an academic paper on the relationship and will submit it to economic or political science journals. Dezhbakhsh also provided the Council of Economic Advisers with a copy for its use.
Dezhbakhsh’s contributions to the oil-company merger study were mostly methodological, but when the results came out in May, they made a huge impact.

“[Some] economists argue that when firms merge, they try to capitalize on ‘scale economies,’” Dezhbakhsh said. “They try to reduce the cost of producing, gain efficiencies, get rid of duplicate structures and the reduced costs are passed onto consumers in the form of lower prices.

“There is another school of thought that argues firms merge so that they have less competition,” he continued. “They own a larger percentage of the market and they can control the price better. That leads to a price increase. Ultimately it becomes an empirical issue. Let’s look at it and see what’s happened.”

That’s what the GAO researchers did, and they found that increased market concentration led to higher wholesale gas prices. The increase was as high as 7 cents a gallon for certain fuels sold in California through 2000.

The results of the study released in May led, in part, to a contentious debate in the Senate concerning President Bush’s nominee to head the Federal Trade Commission (FTC). The debate was related to the agency’s policies regarding petroleum industry mergers, and the study was used as evidence of price gouging in the gasoline industry as a result of the FTC’s merger policies in the petroleum industry.

Dezhbakhsh contributed to other studies as well. One of his methodological suggestions led researchers to uncover a pattern in wage gap between men and women, one that had been shrinking until 2000, when it widened following Bush’s election. The study that resulted found its way to the website of a Democratic Congresswoman—the politicization of the nonpartisan GAO research was plain to see.

“Here you are sitting in a meeting, you are having an intellectual exchange, all of a sudden there is a suggestion, then two weeks later a report is affected by these suggestions and the result makes it to the webpage of a lawmaker,” Dezhbakhsh said. “That is fascinating.”

Dezhbakhsh and his co-writers are working to turn his efforts with the oil industry study into an academic paper similar to his performance-based budget piece.

“The advantage of being at the GAO was having access to the data and then having the opportunity to talk to people who work on budget issues all year long,” he said. “They are familiar with a lot of the subtleties.”

Dezhbakhsh’s relationship with the GAO isn’t finished. He invited its head, Comptroller General David Walker, to Emory for a public presentation on some of the strategic issues that face the United States in the 21st century. Walker accepted, and the two are working to secure an appearance date.