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Real and Perceived Effects of Changing the Grant System from Specific to General Grants

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  • Oulasvirta, Lasse

Abstract

The paper is based on a study of the 199e Finnish grant reform, changing from a system with earmarked matching grants to a system with general, non-matching grants. The analysis of cross-sectional data confirms the 'fly-paper effect' and also that matching grants have a stronger stimulating effect than non-matching grants on local expenditure. The fly-paper effect is then modified to take account of the distribution of power inside local government. The change to general grants without central government supervision might mean more power to the central management in the local government and a diminished power for sector officers and groups dependent on the sector services. Perceptions of principal actors in the local government budget process were that the reform changed the distribution of power, in some municipalities to the disadvantage of locally small weak groups that could benefit under the old system of earmarked matching grants. Copyright 1997 by Kluwer Academic Publishers

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  • Oulasvirta, Lasse, 1997. "Real and Perceived Effects of Changing the Grant System from Specific to General Grants," Public Choice, Springer, vol. 91(3-4), pages 397-416, June.
  • Handle: RePEc:kap:pubcho:v:91:y:1997:i:3-4:p:397-416
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    Cited by:

    1. Kemmerling, Achim & Stephan, Andreas, 2002. "The Contribution of Local Public Infrastructure to Private Productivity and Its Political Economy: Evidence from a Panel of Large German Cities," Public Choice, Springer, vol. 113(3-4), pages 403-424, December.
    2. 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.
    3. Alicja Sekula & Joanna Smiechowicz, 2016. "Systems Of General Grants For Local Governments In Selected Eu Countries Against The Background Of The General Theory Of Fiscal Policy," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 11(4), pages 711-734, December.
    4. Marcel Thum & Thomas Fester & Andreas Kappler & Helmut Seitz, 2005. "Öffentliche Infrastruktur und kommunale Finanzen : Gutachten im Auftrag des Bundesministeriums für Verkehr, Bau- und Wohnungswesen und des Bundesamtes für Bauwesen und Raumordnung," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 37, February.
    5. Mazza, Isidoro & van Winden, Frans, 2008. "An endogenous policy model of hierarchical government," European Economic Review, Elsevier, vol. 52(1), pages 133-149, January.

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