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A Theory of Intergovernmental Grants and their Effect on Aggregate Grantor-Recipient Spending

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  • Daniel P. Schwallie

Abstract

The impact of intergovernmental grants on the expenditures of recipients has been the focus of considerable investigation, while their impact on the relative sizes of the public and private sectors has been given little more than brief discussion. No well-defined structure has emerged to explain how a system of intergovernmental grants might affect public sector size. This article is a first attempt at such a structure. It investigates the impact of intergovernmental grants by comparing public sector size in the presence of conditional lump-sum grants to public sector size in their absence for given grantor and recipient preferences on the allocation of financial resources between the private and public sectors. Implications are drawn from the model and comments are made pertaining to the empirical investigations of grant effects on recipient governments spending.

Suggested Citation

  • Daniel P. Schwallie, 1987. "A Theory of Intergovernmental Grants and their Effect on Aggregate Grantor-Recipient Spending," Public Finance Review, , vol. 15(3), pages 322-338, July.
    • Handle: RePEc:sae:pubfin:v:15:y:1987:i:3:p:322-338
    DOI: 10.1177/109114218701500305
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    References listed on IDEAS

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    1. Fisher, Ronald C., 1982. "Income and grant effects on local expenditure: The flypaper effect and other difficulties," Journal of Urban Economics, Elsevier, vol. 12(3), pages 324-345, November.
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