This paper compares the distortions associated with alternative inter-governmental allocation rules when a central authority provides inputs for the provision of social services by local governments, and when local governments differ in their needs. Under a quantity-based mechanism, the input choices of high-need localities will tend to be distorted downwards. In order to convince the center of their higher needs, these communities signal their status by spending too little. However, under an expenditure-based mechanism the direction of distortion of the input choices of high-need localities depends on the price elasticity of demand for the local input. When demand is inelastic (elastic), in order to signal their high needs, high-need localities spend too much (little) on local inputs.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Georgetown University, Department of Economics in its series Working Papers with number
gueconwpa~03-03-17.
Length: Date of creation: 03 Sep 2003 Date of revision: Handle: RePEc:geo:guwopa:gueconwpa~03-03-17
Contact details of provider: Postal: Georgetown University Department of Economics Washington, DC 20057-1036 Phone: 202-687-6074 Fax: 202-687-6102 Email: Web page: http://econ.georgetown.edu/
Order Information: Postal: Marcia Suss Administrative Officer Georgetown University Department of Economics Washington, DC 20057-1036 Email: Web: http://econ.georgetown.edu/
For technical questions regarding this item, or to correct its listing, contact: (Marcia Suss).
Find related papers by JEL classification: D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General