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Local Authority Responses to Grants: Different Types of Response and Equilibrium

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  • M M Barrow

    (School of Social Sciences, University of Sussex, Falmer, Brighton BN1 9QN, England)

Abstract

Game theoretic techniques are used to examine the case of local authorities facing a system of closed-ended central government grants. A diagrammatic exposition of the results from a previous paper is provided, and the results extended to cover alternative types of equilibrium. It is shown that local government behaviour may be Pareto inefficient in response to grants, the inefficiency being manifested in too high a level of local government spending. It is also shown that authorities which try to protect their local tax rate may be at a disadvantage relative to those which make a commitment to high spending.

Suggested Citation

  • M M Barrow, 1989. "Local Authority Responses to Grants: Different Types of Response and Equilibrium," Environment and Planning C, , vol. 7(3), pages 313-320, September.
    • Handle: RePEc:sae:envirc:v:7:y:1989:i:3:p:313-320
    DOI: 10.1068/c070313
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    References listed on IDEAS

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    1. Jack Mintz & Henry Tulkens, 2006. "Commodity Tax Competition Between Member States of a Federation: Equilibrium and Efficiency," Springer Books, in: Parkash Chander & Jacques Drèze & C. Knox Lovell & Jack Mintz (ed.), Public goods, environmental externalities and fiscal competition, chapter 0, pages 449-489, Springer.
    2. Waldauer, Charles, 1973. "Grant Structures and Their Effects on Aided Government Expenditures: An Indifference Curve Analysis," Public Finance = Finances publiques, , vol. 28(2), pages 212-226.
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