Conditional Grants, Grant-Seeking and Welfare when there is Government Failure on the Subordinate Level
AbstractThe paper addresses the welfare implications of conditional grants if government failure leads to inefficiencies in the production of regional public goods and services. Conditional grants may improve welfare by setting incentives for regions to improve efficiency. At the same time, resources are wasted in the process of grant-seeking. This paper provides a theoretical model to assess the net effect on welfare. A three-stage game-theoretic context is developed and simulations are performed to derive the optimal grant-distribution scheme. We found conditional grants to be welfare-enhancing in the vast majority of simulated scenarios under a classical utilitarian welfare function. Once distributional concerns are accounted for, the scope for conditional grants becomes limited. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 08-031.
Date of creation: 2008
Date of revision:
conditional grants; government failure; rent-seeking; normative public finance;
Find related papers by JEL classification:
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- H5 - Public Economics - - National Government Expenditures and Related Policies
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- D7 - Microeconomics - - Analysis of Collective Decision-Making
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-30 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Tabellini, Guido & Alesina, Alberto, 1990.
"Voting on the Budget Deficit,"
American Economic Review, American Economic Association,
American Economic Association, vol. 80(1), pages 37-49, March.
- Alesina, Alberto F & Tabellini, Guido, 1988. "Voting on the Budget Deficit," CEPR Discussion Papers, C.E.P.R. Discussion Papers 269, C.E.P.R. Discussion Papers.
- Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," Scholarly Articles 4553030, Harvard University Department of Economics.
- Guido Tabellini & Alberto Alesina, 1988. "Voting on the Budget Deficit," UCLA Economics Working Papers, UCLA Department of Economics 539, UCLA Department of Economics.
- Alberto Alesina & Guido Tabellini, 1988. "Voting on the Budget Deficit," NBER Working Papers 2759, National Bureau of Economic Research, Inc.
- BELLEFLAMME, Paul & HINDRIKS, Jean, 2002.
"Yardstick competition and political agency problems,"
CORE Discussion Papers, UniversitÃ© catholique de Louvain, Center for Operations Research and Econometrics (CORE)
2002029, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Paul Belleflamme & Jean Hindriks, 2005. "Yardstick competition and political agency problems," Social Choice and Welfare, Springer, Springer, vol. 24(1), pages 155-169, 09.
- Paul Belleflamme & Jean Hindriks, 2001. "Yardstick Competition and Political Agency Problems," Working Papers, Queen Mary, University of London, School of Economics and Finance 441, Queen Mary, University of London, School of Economics and Finance.
- Guy Gilbert & Yvon Rocaboy, 2004. "The central government grant allocation problem in the presence of misrepresentation and cheating," Economics of Governance, Springer, Springer, vol. 5(2), pages 137-147, 07.
- Grossman, Philip J, 1994.
" A Political Theory of Intergovernmental Grants,"
Public Choice, Springer,
Springer, vol. 78(3-4), pages 295-303, March.
- Philip J. Grossman, 1987. "A Political Theory of Inter-Governmental Grants," School of Economics Working Papers, University of Adelaide, School of Economics 1987-06, University of Adelaide, School of Economics.
- David Romer, 1997.
"Misconceptions and Political Outcomes,"
NBER Working Papers
6117, National Bureau of Economic Research, Inc.
- Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September.
- Boadway, Robin & Horiba, Isao & Jha, Raghbendra, 1999. " The Provision of Public Services by Government Funded Decentralized Agencies," Public Choice, Springer, Springer, vol. 100(3-4), pages 157-84, September.
- Anwar Shah, 2006.
"A Practitioner´s Guide to Intergovernmental Fiscal Transfers,"
Revista de Economía y Estadística, Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas,
Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas, vol. 0(2), pages 128-186, July.
- Shah, Anwar, 2006. "A practitioner's guide to intergovernmental fiscal transfers," Policy Research Working Paper Series 4039, The World Bank.
- W. Crain & J. O’Roark, 2004. "The impact of performance-based budgeting on state fiscal performance," Economics of Governance, Springer, Springer, vol. 5(2), pages 167-186, 07.
- Grossman, Philip J. & Mavros, Panayiotis & Wassmer, Robert W., 1999. "Public Sector Technical Inefficiency in Large U.S. Cities," Journal of Urban Economics, Elsevier, vol. 46(2), pages 278-299, September.
- Robert Fenge & Matthias Wrede, 2007. "EU Financing and Regional Policy: Vertical Fiscal Externalities when Capital is Mobile," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 63(4), pages 457-476, December.
- Chang, Chinkun & Turnbull, Geoffrey K, 2002. " Bureaucratic Behavior in the Local Public Sector: A Revealed Preference Approach," Public Choice, Springer, Springer, vol. 113(1-2), pages 191-210, October.
- Philip J. Grossman, 1996. "The distribution of Federal grants-in-aid: the increasing importance of PACS relative to state and local political parties," Development Research Unit Working Paper Series, Monash University, Department of Economics archive-13, Monash University, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.