IDEAS home Printed from https://ideas.repec.org/a/kap/itaxpf/v25y2018i1d10.1007_s10797-017-9442-7.html
   My bibliography  Save this article

The stimulative effect of an unconditional block grant on the decentralized provision of care

Author

Listed:
  • Mark Kattenberg

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Wouter Vermeulen

    (CPB Netherlands Bureau for Economic Policy Analysis
    Spatial Economics Research Centre (SERC))

Abstract

Understanding the impact of central government grants on decentralized healthcare provision is of crucial importance for the design of grant systems, yet empirical evidence on the prevalence of flypaper effects in this domain is rare. We study the decentralization of home care in the Netherlands and exploit the gradual introduction of formula-based equalization to identify the effect of exogenous changes in an unconditional block grant on local expenditure and utilization. A one euro increase in central government grants raises local expenditure by twenty to fifty cents. Adjustments occur through the number of hours as well as through substitution between basic and more advanced types of assistance. These findings suggest that conditioning of grants is not required for the central government to retain a moderate degree of control over the decentralized provision of care.

Suggested Citation

  • Mark Kattenberg & Wouter Vermeulen, 2018. "The stimulative effect of an unconditional block grant on the decentralized provision of care," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(1), pages 166-199, February.
    • Handle: RePEc:kap:itaxpf:v:25:y:2018:i:1:d:10.1007_s10797-017-9442-7
    DOI: 10.1007/s10797-017-9442-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10797-017-9442-7
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10797-017-9442-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gordon, Nora, 2004. "Do federal grants boost school spending? Evidence from Title I," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1771-1792, August.
    2. Barrow, Lisa & Rouse, Cecilia Elena, 2004. "Using market valuation to assess public school spending," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1747-1769, August.
    3. Tirole, Jean, 1994. "The Internal Organization of Government," Oxford Economic Papers, Oxford University Press, vol. 46(1), pages 1-29, January.
    4. Singhal, Monica, 2008. "Special interest groups and the allocation of public funds," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 548-564, April.
    5. Allers, Maarten A. & Vermeulen, Wouter, 2016. "Capitalization of equalizing grants and the flypaper effect," Regional Science and Urban Economics, Elsevier, vol. 58(C), pages 115-129.
    6. Daniel Bergvall & Claire Charbit & Dirk-Jan Kraan & Olaf Merk, 2006. "Intergovernmental Transfers and Decentralised Public Spending," OECD Journal on Budgeting, OECD Publishing, vol. 5(4), pages 111-158.
    7. Katherine Baicker & Douglas Staiger, 2005. "Fiscal Shenanigans, Targeted Federal Health Care Funds, and Patient Mortality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(1), pages 345-386.
    8. Heléne Lundqvist, 2015. "Granting public or private consumption? Effects of grants on local public spending and income taxes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(1), pages 41-72, February.
    9. Brennan, G. & Pincus, J. J., 1996. "A minimalist model of federal grants and flypaper effects," Journal of Public Economics, Elsevier, vol. 61(2), pages 229-246, August.
    10. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1105-1166, December.
    11. Leah Brooks & Justin Phillips & Maxim Sinitsyn, 2011. "The Cabals of a Few or the Confusion of a Multitude: The Institutional Trade-Off between Representation and Governance," American Economic Journal: Economic Policy, American Economic Association, vol. 3(1), pages 1-24, February.
    12. Baicker, Katherine, 2001. "Government decision-making and the incidence of federal mandates," Journal of Public Economics, Elsevier, vol. 82(2), pages 147-194, November.
    13. Craig, Steven G. & Howard, Larry L., 2014. "Is Medicaid crowding out other state government expenditure? Internal financing and cross-program substitution," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 164-178.
    14. Robert P. Inman, 2008. "The Flypaper Effect," NBER Working Papers 14579, National Bureau of Economic Research, Inc.
    15. Pauly, Mark V., 1973. "Income redistribution as a local public good," Journal of Public Economics, Elsevier, vol. 2(1), pages 35-58, February.
    16. Evans, William N. & Owens, Emily G., 2007. "COPS and crime," Journal of Public Economics, Elsevier, vol. 91(1-2), pages 181-201, February.
    17. Mosca, Ilaria, 2006. "Is decentralisation the real solution?: A three country study," Health Policy, Elsevier, vol. 77(1), pages 113-120, June.
    18. Byron Lutz, 2010. "Taxation with Representation: Intergovernmental Grants in a Plebiscite Democracy," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 316-332, May.
    19. Brian Knight, 2002. "Endogenous Federal Grants and Crowd-out of State Government Spending: Theory and Evidence from the Federal Highway Aid Program," American Economic Review, American Economic Association, vol. 92(1), pages 71-92, March.
    20. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-774, September.
    21. Tediosi, Fabrizio & Gabriele, Stefania & Longo, Francesco, 2009. "Governing decentralization in health care under tough budget constraint: What can we learn from the Italian experience?," Health Policy, Elsevier, vol. 90(2-3), pages 303-312, May.
    22. James R. Hines & Richard H. Thaler, 1995. "The Flypaper Effect," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 217-226, Fall.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Koichi Fukumura & Atsushi Yamagishi, 2020. "Minimum wage competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(6), pages 1557-1581, December.
    2. Marenzi, Anna & Rizzi, Dino & Zanette, Michele & Zantomio, Francesca, 2023. "Regional institutional quality and territorial equity in LTC provision," The Journal of the Economics of Ageing, Elsevier, vol. 26(C).
    3. Manuel E. Lago & Santiago Lago-Peñas & Jorge Martinez-Vazquez, 2024. "On the effects of intergovernmental grants: a survey," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 856-908, June.
    4. Marenzi, A.; & Rizzi, D.; & Zanette, M.; & Zantomio, F.;, 2022. "Regional Institutional Quality and Territorial Equity in LTC Provision," Health, Econometrics and Data Group (HEDG) Working Papers 22/27, HEDG, c/o Department of Economics, University of York.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kattenberg, Mark & Vermeulen, Wouter, 2017. "The stimulative effect of an unconditional block grant on the decentralized provision of care," LSE Research Online Documents on Economics 86956, London School of Economics and Political Science, LSE Library.
    2. Mark Kattenberg & Wouter Vermeulen, 2016. "The Stimulative Effect of an Unconditional Block Grant on the Decentralized Provision of Care," SERC Discussion Papers 0209, Centre for Economic Performance, LSE.
    3. Mark Kattenberg & Wouter Vermeulen, 2015. "The stimulative effect of an unconditional block grant on the decentralized provision of care," CPB Discussion Paper 308, CPB Netherlands Bureau for Economic Policy Analysis.
    4. Mark Kattenberg & Wouter Vermeulen, 2015. "The stimulative effect of an unconditional block grant on the decentralized provision of care," CPB Discussion Paper 308.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Manuel E. Lago & Santiago Lago-Peñas & Jorge Martinez-Vazquez, 2024. "On the effects of intergovernmental grants: a survey," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 856-908, June.
    6. Ines Helm & Jan Stuhler, 2024. "The Dynamic Response of Municipal Budgets to Revenue Shocks," American Economic Journal: Applied Economics, American Economic Association, vol. 16(4), pages 484-527, October.
    7. Heléne Lundqvist, 2015. "Granting public or private consumption? Effects of grants on local public spending and income taxes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(1), pages 41-72, February.
    8. Becker, Johannes & Hopp, Daniel & Kriebel, Michael, 2020. "Mental accounting of public funds – The flypaper effect in the lab," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 321-336.
    9. Sylvain Leduc & Daniel Wilson, 2013. "Roads to Prosperity or Bridges to Nowhere? Theory and Evidence on the Impact of Public Infrastructure Investment," NBER Macroeconomics Annual, University of Chicago Press, vol. 27(1), pages 89-142.
    10. Eric Brunner & Joshua Hyman & Andrew Ju, 2020. "School Finance Reforms, Teachers' Unions, and the Allocation of School Resources," The Review of Economics and Statistics, MIT Press, vol. 102(3), pages 473-489, July.
    11. Sebastian Langer & Artem Korzhenevych, 2019. "Equalization Transfers and the Pattern of Municipal Spending: An Investigation of the Flypaper Effect in Germany," Annals of Economics and Finance, Society for AEF, vol. 20(2), pages 737-765, November.
    12. Marko Köthenbürger & Gabriel Loumeau, 2023. "Tax Responses in Local Public Finance: The Flypaper Effect at Work," CESifo Working Paper Series 10354, CESifo.
    13. Sylvain Leduc & Daniel J. Wilson, 2022. "The Road of Federal Infrastructure Spending Passes Through the States," Working Paper Series 2022-03, Federal Reserve Bank of San Francisco.
    14. Flynn, Patrick & Smith, Tucker, 2022. "Rivers, lakes and revenue streams: The heterogeneous effects of Clean Water Act grants on local spending," Journal of Public Economics, Elsevier, vol. 212(C).
    15. Chang Liu & Guangrong Ma, 2016. "Taxation without representation: local fiscal response to intergovernmental transfers in China," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(5), pages 854-874, October.
    16. Cassidy, Traviss, 2017. "Revenue Persistence and Public Service Delivery," MPRA Paper 114464, University Library of Munich, Germany, revised 06 Sep 2022.
    17. Antti Saastamoinen & Mika Kortelainen, 2020. "When Does Money Stick in Education? Evidence from A Kinked Grant Rule," Education Finance and Policy, MIT Press, vol. 15(4), pages 708-735, Fall.
    18. Thushyanthan Baskaran, 2016. "Intergovernmental Transfers, Local Fiscal Policy, and the Flypaper Effect: Evidence from a German State," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 72(1), pages 1-40, March.
    19. Byron F. Lutz, 2006. "Taxation with representation: intergovernmental grants in a plebiscite democracy," Finance and Economics Discussion Series 2006-06, Board of Governors of the Federal Reserve System (U.S.).
    20. Besfamille, Martín & Jorrat, Diego A. & Manzano, Osmel & Quiroga, Bernardo F. & Sanguinetti, Pablo, 2023. "How do subnational governments react to shocks to different revenue sources? Evidence from hydrocarbon-producing provinces in Argentina," Journal of Urban Economics, Elsevier, vol. 136(C).

    More about this item

    Keywords

    Intergovernmental transfers; Flypaper effect; Decentralization of health care;
    All these keywords.

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:itaxpf:v:25:y:2018:i:1:d:10.1007_s10797-017-9442-7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.