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Cost-Sharing versus Block-Funding in a Federal System: A Demand Systems Approach

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  • Peter C. Coyte
  • Stuart Landon

Abstract

This paper employs a maximizing framework, consistent with the axioms of consumer preference, to analyze local government's choice of spending on different social services. Within this framework, it is possible to include both block-funding and cost-sharing intergovernment transfer schemes. Canada's movement to block-funding from the cost-sharing method of financing provincial expenditures on hospitals, medical care, and post-secondary education is analyzed. The results indicate that the provincial governments' actions are generally consistent with a significant maximizing model of consumer behavior and that the change to block-funding had a significant impact on real provincial funding of some previously cost-shared social services.

Suggested Citation

  • Peter C. Coyte & Stuart Landon, 1990. "Cost-Sharing versus Block-Funding in a Federal System: A Demand Systems Approach," Canadian Journal of Economics, Canadian Economics Association, vol. 23(4), pages 817-838, November.
    • Handle: RePEc:cje:issued:v:23:y:1990:i:4:p:817-38
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    Cited by:

    1. Craig, Steven G. & Howard, Larry L., 2014. "Is Medicaid crowding out other state government expenditure? Internal financing and cross-program substitution," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 164-178.
    2. George TRIDIMAS, 2006. "The economics and empirics of the allocation of public consumption expenditures," Departmental Working Papers 2006-02, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    3. Bev Dahlby, 2011. "The marginal cost of public funds and the flypaper effect," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(3), pages 304-321, June.
    4. Brian Ferguson, 1996. "Expenditure on physicians' services in Canada: Was Medicare a structural change?," Health Economics, John Wiley & Sons, Ltd., vol. 5(5), pages 409-419, September.

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