Optimal Design of Intergovernmental Grants under Asymmetric Information
This paper develops a theoretical explanation why it may be optimal for higher-level governments to pay categorical block grants or closed-ended matching grants to local governments. We consider a federation with two types of local governments which differ in the cost of providing public goods. The federal government redistributes between jurisdictions, but cannot observe the type of a jurisdiction. In this asymmetric information setting it is shown that the second-best optimum can be decentralized with the help of categorical block grants and closed-ended matching grants, but not with unconditional block grants or open-ended matching grants.
|Date of creation:||2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
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.:
- Massimo Bordignon & Paolo Manasse & Guido Tabellini, .
"Optimal Regional Redistribution Under Asymmetric Information,"
93, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Massimo Bordignon & Paolo Manasse & Guido Tabellini, 2001. "Optimal Regional Redistribution under Asymmetric Information," American Economic Review, American Economic Association, vol. 91(3), pages 709-723, June.
- Bordignon, Massimo & Manasse, Paolo & Tabellini, Guido, 1996. "Optimal Regional Redistribution Under Asymmetric Information," CEPR Discussion Papers 1437, C.E.P.R. Discussion Papers.
- Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September.
- Richard C. Cornes & Emilson C. D. Silva, 2003. "Public Good Mix in a Federation with Incomplete Information," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 381-397, 04.
- Lockwood, Ben, 1999.
Journal of Public Economics,
Elsevier, vol. 72(1), pages 1-37, April.
- Bird, Richard M. & Smart, Michael, 2002. "Intergovernmental Fiscal Transfers: International Lessons for Developing Countries," World Development, Elsevier, vol. 30(6), pages 899-912, June.
- Bucovetsky, S. & Marchand, M. & Pestieau, P., 1998.
"Tax Competition and Revelation of Preferences for Public Expenditure,"
Journal of Urban Economics,
Elsevier, vol. 44(3), pages 367-390, November.
- BUCOVETSKY, Sam & MARCHAND, Maurice & PESTIEAU, Pierre, 1997. "Tax competition and revelation of preferences for public expenditure," CORE Discussion Papers 1997003, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- 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.
- Cornes, Richard C. & Silva, Emilson C. D., 2002.
"Local public goods, inter-regional transfers and private information,"
European Economic Review,
Elsevier, vol. 46(2), pages 329-356, February.
- Richard C. Cornes & Emilson C.D. Silva, 1996. "Local Public Goods, Inter-Regional Transfers and Private Information," Keele Department of Economics Discussion Papers (1995-2001) 96/11, Department of Economics, Keele University.
- Horst Raff & John Wilson, 1997. "Income Redistribution with Well-Informed Local Governments," International Tax and Public Finance, Springer, vol. 4(4), pages 407-427, November.
- Bev Dahlby, 1996. "Fiscal externalities and the design of intergovernmental grants," International Tax and Public Finance, Springer, vol. 3(3), pages 397-412, July.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_919. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)
If references are entirely missing, you can add them using this form.