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The Political Determination of Intergovernmental Grants in Australia

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  • Worthington, Andrew C
  • Dollery, Brian E

Abstract

Intergovernmental grants have been conventionally explained on the basis of either equity/efficiency and/or institutional considerations. This paper seeks to model Australian intergovernmental grants by including both traditional public finance variables and public choice influences; that is, grants are used by federal government politicians to purchase political capital, thereby enhancing their own chances of reelection. The models employed in this paper are tested for six Australian states for the period 1981-82 to 1991-92 using unsystematic grant transfers. The results provide support for these public choice considerations and highlight the importance of incorporating institutional factors and controlling for misspecification in the error structure in estimates of this type. Copyright 1998 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Public Choice.

Volume (Year): 94 (1998)
Issue (Month): 3-4 (March)
Pages: 299-315

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Handle: RePEc:kap:pubcho:v:94:y:1998:i:3-4:p:299-315

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Web page: http://www.springerlink.com/link.asp?id=100332

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  1. Philip J. Grossman, 1990. "The Impact of Federal and State Grants on Local Government Spending: a Test of the Fiscal Illusion Hypothesis," Public Finance Review, , vol. 18(3), pages 313-327, July.
  2. Philip J. Grossman, 1987. "A Political Theory of Inter-Governmental Grants," School of Economics Working Papers 1987-06, University of Adelaide, School of Economics.
  3. Davidson, Russell & MacKinnon, James G, 1981. "Several Tests for Model Specification in the Presence of Alternative Hypotheses," Econometrica, Econometric Society, vol. 49(3), pages 781-93, May.
  4. Dennis Patrick Leyden, 1992. "Donor-Determined Intergovernmental Grants Structure," Public Finance Review, , vol. 20(3), pages 321-337, July.
  5. Hammes, David L & Wills, Douglas T, 1987. "Fiscal Illusion and the Grantor Government in Canada," Economic Inquiry, Western Economic Association International, vol. 25(4), pages 707-13, October.
  6. Logan, Robert R, 1986. "Fiscal Illusion and the Grantor Government," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1304-18, December.
  7. Kirchgassner, Gebhard & Schimmelpfenning, Jorg, 1992. " Closeness Counts If It Matters for Electoral Victory: Some Empirical Results for the United Kingdom and the Federal Republic of Germany," Public Choice, Springer, vol. 73(3), pages 283-99, April.
  8. Wallis, John Joseph, 1991. "The Political Economy of New Deal Fiscal Federalism," Economic Inquiry, Western Economic Association International, vol. 29(3), pages 510-24, July.
  9. Mel Bungey & Peter Kenyon & Philip J. Grossman, 1991. "Explaining intergovernmental grants: Australian evidence," Development Research Unit Working Paper Series archive-14, Monash University, Department of Economics.
  10. Mathews, Russell, 1985. "The Grants Commission's Relativities Proposals: A Comment," Australian Economic Papers, Wiley Blackwell, vol. 24(44), pages 214-17, June.
  11. Winer, Stanley L, 1983. "Some Evidence on the Effect of the Separation of Spending and Taxing Decisions," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 126-40, February.
  12. Wright, Gavin, 1974. "The Political Economy of New Deal Spending: An Econometric Analysis," The Review of Economics and Statistics, MIT Press, vol. 56(1), pages 30-38, February.
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