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Poverty Reduction Using Self-Interested Intermediaries: Implications for the Design of Inter-Governmental Transfers

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Abstract

The paper studies the design of inter-governmental transfers when redistribution is effected through the public provision of a private good (education) by local government agents. The central government does not necessarily have the same preferences as the local agents regarding the relative welfare of poor and non-poor individuals, but must rely on them to implement public spending decisions. This divergence of preferences induces an incentive role, which does not rely on the existence of externalities, for matching grants that take the form of two-part tariffs. Numerical simulations are used to investigate the dependence of the matching grant on the relationship between central and local preferences, local poverty rates, and the use of poverty maps.

Suggested Citation

  • Billy Jack, 2003. "Poverty Reduction Using Self-Interested Intermediaries: Implications for the Design of Inter-Governmental Transfers," Working Papers gueconwpa~03-03-18, Georgetown University, Department of Economics.
    • Handle: RePEc:geo:guwopa:gueconwpa~03-03-18
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    References listed on IDEAS

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    1. Blomquist, Soren & Christiansen, Vidar, 1999. "The political economy of publicly provided private goods," Journal of Public Economics, Elsevier, vol. 73(1), pages 31-54, July.
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    6. Conning, Jonathan & Kevane, Michael, 2001. "Community based targeting mechanisms for social safety nets," Social Protection Discussion Papers and Notes 23146, The World Bank.
    7. Galasso, Emanuela & Ravallion, Martin, 2000. "Distributional outcomes of a decentralized welfare program," Policy Research Working Paper Series 2316, The World Bank.
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    More about this item

    Keywords

    decentralization; poverty aleviation; inter-governmental grants;
    All these keywords.

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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