The central government grant allocation problem in the presence of misrepresentation and cheating
This study deals with the central government grant allocation problem under conditions of asymmetric information. Using a simple model, we examine herein the optimal design of random audit and incentive mechanisms to encourage the grantee (the local government authority) to report truthfully on local parameters required in the granting process. The local government authority must choose between two possibilities: a menu of contracts that could be considered as a matching grant programme with random auditing vs. a lump-sum grant without any audit mechanism. We will show that addressing the optimal grant system problem is similar to comparing slopes on the graph of the indirect local government welfare function at two distinct points. Copyright Springer-Verlag Berlin/Heidelberg 2004
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|Date of creation:||2004|
|Publication status:||Published in Economics of Governance, Springer Verlag, 2004, pp.137-147|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00068990|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
References listed on IDEAS
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- Levaggi, Rosella & Smith, Peter, 1994.
"On the Intergovernmental Fiscal Game,"
Public Finance = Finances publiques,
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- Rosella Levaggi & Peter Smith, "undated". "On the Intergovernmental Fiscal Game," Discussion Papers 93/5, Department of Economics, University of York.
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- CREMER, Helmuth & MARCHAND, Maurice & PESTIEAU, Pierre, 1994. "Interregional Reditribution through Tax Surcharge," CORE Discussion Papers 1994069, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Tracy Snoddon & Jean-François Wen, 2003. "Grants structure in an intergovernmental fiscal game," Economics of Governance, Springer, vol. 4(2), pages 115-126, 08.
- M M Barrow, 1989. "Local authority responses to grants: different types of response and equilibrium," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 7(3), pages 313-320, June.
- Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
- Gilbert, Guy & Picard, Pierre, 1996. "Incentives and optimal size of local jurisdictions," European Economic Review, Elsevier, vol. 40(1), pages 19-41, January.
- M M Barrow, 1986. "Central grants to local governments: a game theoretic approach," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 4(2), pages 155-164, April. Full references (including those not matched with items on IDEAS)
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