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Poverty Reduction Using Self-Interested Intermediaries: Implications for the Design of Inter-Governmental Transfers

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Abstract

The paper studies the design of inter-governmental transfers when redistribution is effected through the public provision of a private good (education) by local government agents. The central government does not necessarily have the same preferences as the local agents regarding the relative welfare of poor and non-poor individuals, but must rely on them to implement public spending decisions. This divergence of preferences induces an incentive role, which does not rely on the existence of externalities, for matching grants that take the form of two-part tariffs. Numerical simulations are used to investigate the dependence of the matching grant on the relationship between central and local preferences, local poverty rates, and the use of poverty maps.

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Bibliographic Info

Paper provided by Georgetown University, Department of Economics in its series Working Papers with number gueconwpa~03-03-18.

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Date of creation: 03 Sep 2003
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Handle: RePEc:geo:guwopa:gueconwpa~03-03-18

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Postal: Georgetown University Department of Economics Washington, DC 20057-1036
Phone: 202-687-6074
Fax: 202-687-6102
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Web page: http://econ.georgetown.edu/

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Postal: Marcia Suss Administrative Officer Georgetown University Department of Economics Washington, DC 20057-1036
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Web: http://econ.georgetown.edu/

Related research

Keywords: decentralization; poverty aleviation; inter-governmental grants;

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References

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  1. Besley, Timothy & Coate, Stephen, 1991. "Public Provision of Private Goods and the Redistribution of Income," American Economic Review, American Economic Association, vol. 81(4), pages 979-84, September.
  2. Conning, Jonathan & Kevane, Michael, 2001. "Community based targeting mechanisms for social safety nets," Social Protection Discussion Papers 23146, The World Bank.
  3. Pranab Bardhan & Dilip Mookherjee, 1998. "Expenditure Decentralization and the Delivery of Public Services in Developing Countries," Boston University - Institute for Economic Development 90, Boston University, Institute for Economic Development.
  4. Massimo Bordignon & Paolo Manasse & Guido Tabellini, 2001. "Optimal Regional Redistribution under Asymmetric Information," American Economic Review, American Economic Association, vol. 91(3), pages 709-723, June.
  5. Ravallion, Martin, 1998. "Reaching poor areas in a federal system," Policy Research Working Paper Series 1901, The World Bank.
  6. Lommerud, K.E., 1988. "Educational Subsidies When Relative Income Matters," Papers 05-88, Norwegian School of Economics and Business Administration-.
  7. Galasso, Emanuela & Ravallion, Martin, 2000. "Distributional outcomes of a decentralized welfare program," Policy Research Working Paper Series 2316, The World Bank.
  8. Sheshinski, Eytan, 1972. "The Optimal Linear Income-Tax," Review of Economic Studies, Wiley Blackwell, vol. 39(3), pages 297-302, July.
  9. Blomquist, Sören & Christiansen, Vidar, 1998. "The Political Economy of Publicly Provided Private Goods," Working Paper Series 1998:14, Uppsala University, Department of Economics.
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