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The Determinants of the Incidence of Intergovernmental Grants: A Survey of the International Experience

Although the presence of objective formula-based grants is an important component of a stable, equitable and efficient system of intergovernmental fiscal relations, the final incidence of grants is not always according to what is stated in the formula because there are other intervening institutional factors. Furthermore, the intergovernmental grant mechanism itself is often a function of the same interests or forces that ultimately drive the incidence of grant resources. This paper relates the horizontal allocation of intergovernmental grants directly to their potential underlying determinants, including normative policy issues, voter choice arguments and political considerations. An international comparison of empirical incidence studies reveals that besides local expenditure needs and local fiscal capacity, other factors including political influence and a jurisdiction’s size play important and consistent roles in determining the horizontal allocation of per capita intergovernmental grants.

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Paper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper0509.

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Length: 25 pages
Date of creation: 01 Mar 2005
Date of revision:
Handle: RePEc:ays:ispwps:paper0509
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Web page: http://aysps.gsu.edu/isp/index.html

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  1. Grossman, Philip J, 1994. " A Political Theory of Intergovernmental Grants," Public Choice, Springer, vol. 78(3-4), pages 295-303, March.
  2. Steven A. Meyer & Shigeto Naka, 1999. "The Determinants Of Japanese Local-Benefit Seeking," Contemporary Economic Policy, Western Economic Association International, vol. 17(1), pages 87-96, 01.
  3. John Joseph Wallis, 1996. "What Determines the Allocation of National Government Grants to the States?," NBER Historical Working Papers 0090, National Bureau of Economic Research, Inc.
  4. Jorge Martinez-Vasquez & Jameson Boex, 2001. "Russia's Transition to a New Federalism," World Bank Publications, The World Bank, number 15248, June.
  5. Manof Shresta, 2002. "An Overview of Intergovernmental Fiscal Relations in Nepal," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0205, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  6. Baretti, Christian & Huber, Bernd & Lichtblau, Karl, 2002. "A Tax on Tax Revenue: The Incentive Effects of Equalizing Transfers: Evidence from Germany," Munich Reprints in Economics 20129, University of Munich, Department of Economics.
  7. Worthington, Andrew C & Dollery, Brian E, 1998. " The Political Determination of Intergovernmental Grants in Australia," Public Choice, Springer, vol. 94(3-4), pages 299-315, March.
  8. Roy Bahl, 1999. "Implementation Rules For Fiscal Decentralization," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper9901, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  9. Epple, Dennis & Romano, Richard E., 1996. "Ends against the middle: Determining public service provision when there are private alternatives," Journal of Public Economics, Elsevier, vol. 62(3), pages 297-325, November.
  10. Atlas, Cary M, et al, 1995. "Slicing the Federal Government Net Spending Pie: Who Wins, Who Loses, and Why," American Economic Review, American Economic Association, vol. 85(3), pages 624-29, June.
  11. Kitty Stewart, 1997. "Are Intergovernmental Transfers in Russia Equalizing?," Papers iopeps97/7, Innocenti Occasional Papers, Economic Policy Series.
  12. Jameson Boex, 2003. "The incidence of local government allocations in Tanzania," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0311, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  13. James Alm & Jameson Boex, 2002. "An Overview of Intergovernmental Fiscal Relations and Subnational Public Finance in Nigeria," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0201, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  14. Bambang Brodjonegoro & Jorge Martinez-Vazquez, 2004. "An Analysis of Indonesia's Transfer System: Recent Performance and Future Prospects," Chapters, in: Reforming Intergovernmental Fiscal Relations and the Rebuilding of Indonesia, chapter 8 Edward Elgar.
  15. Turnbull, Geoffrey K & Djoundourian, Salpie S, 1994. " The Median Voter Hypothesis: Evidence from General Purpose Local Governments," Public Choice, Springer, vol. 81(3-4), pages 223-40, December.
  16. Stewart, K., 1997. "Are Intergovernmental Transfers in Russia Equalizing?," Economics Working Papers eco97/22, European University Institute.
  17. Christian Baretti & Bernd Huber & Karl Lichtblau, 2002. "A Tax on Tax Revenue: The Incentive Effects of Equalizing Transfers: Evidence from Germany," International Tax and Public Finance, Springer, vol. 9(6), pages 631-649, November.
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