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The Dual-Illusion of Grants-in-Aid on Central and Local Expenditures

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  • Chu, Hong-Yih

Abstract

The purpose of this paper is to clarify some misspecifications that prevail in the dual-illusion hypothesis, which is an important influential theory in fiscal illusion studies. A voter's behavior can hence be self-fulfilling, and the "dual-illusion" will not contradict each other. Our findings also support what the dual-illusion hypothesis expects--that aid raises the demand for recipient government output and reduces the demand for grantor government output. The intergovernment grants therefore do appear to be a common source of fiscal illusion. Copyright 2003 by Kluwer Academic Publishers

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  • Chu, Hong-Yih, 2003. "The Dual-Illusion of Grants-in-Aid on Central and Local Expenditures," Public Choice, Springer, vol. 114(3-4), pages 349-359, March.
    • Handle: RePEc:kap:pubcho:v:114:y:2003:i:3-4:p:349-59
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    Cited by:

    1. Sanandaji, Tino & Wallace, Björn, 2010. "Fiscal Illusion and Fiscal Obfuscation:An Empirical Study of Tax Perception in Sweden," Working Paper Series 837, Research Institute of Industrial Economics.
    2. Marcel Thum & Thomas Fester & Andreas Kappler & Helmut Seitz, 2005. "Öffentliche Infrastruktur und kommunale Finanzen : Gutachten im Auftrag des Bundesministeriums für Verkehr, Bau- und Wohnungswesen und des Bundesamtes für Bauwesen und Raumordnung," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 37, July.
    3. Robert Logan & Yeung-Nan Shieh, 2005. "The dual illusion of grants-in-aid on central and local expenditures: A reply," Public Choice, Springer, vol. 124(3), pages 383-390, September.

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