Special interest groups and the allocation of public funds
AbstractI propose a fully rational model of government contracting that explains differences in local government spending from grants and other income. In this model, violations of fungibility arise from dynamic interactions between politicians and interest groups with the ability to raise funds for the local government. The predictions of the model are tested by exploiting unique features of windfalls received by states under a settlement with the tobacco industry. Although windfalls are legally unrestricted, the median state increased spending on tobacco control programs from zero to $2.30Â per capita upon receipt of funds. The marginal propensity to spend on such programs is 0.20 from settlement revenue and zero from overall income. States which were not involved in the settlement lawsuits spend less. These results cannot be explained by existing models in the literature.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Public Economics.
Volume (Year): 92 (2008)
Issue (Month): 3-4 (April)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505578
Other versions of this item:
- Monica Singhal, 2006. "Special Interest Groups and the Allocation of Public Funds," NBER Working Papers 12037, National Bureau of Economic Research, Inc.
- Singhal, Monica, 2006. "Special Interest Groups and the Allocation of Public Funds," Working Paper Series rwp06-004, Harvard University, John F. Kennedy School of Government.
- H7 - Public Economics - - State and Local Government; Intergovernmental Relations
- D7 - Microeconomics - - Analysis of Collective Decision-Making
- H1 - Public Economics - - Structure and Scope of Government
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