Local Governments' Asymmetric Reactions To Grants: Looking For The Reasons (*)
. The aim of this paper is twofold. Firstly, a data set corresponding to Galician municipalities is used to test asymmetries in the effects of cuts and increases in grants on total spending. Then political factors (electoral cycle, colour and political strength of local governments) and financial factors (relative levels of taxes and debt) are examined as possible explanations of them. Results strongly support the hypothesis of asymmetry. Recipients compensate part of the loss in grants by increasing other sources of revenues. Moreover, asymmetric responses to cuts in capital grants (earmarked) and current grants (unconditional) are not significantly different. This fiscal replacement form of asymmetry is explained by two factors: incumbent’s ideology and financial capacity of getting into debt. Leftist incumbents and municipalities with a lower stock of debt are more prone to asymmetric choices. Once both factors are controlled, asymmetry disappears.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: Avda. Cardenal Herrera Oria, 378, 28035 Madrid|
Web page: http://www.ief.es
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:hpe:wpaper:y:2004:i:22. 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: (Ana Belén Miquel Burgos)
If references are entirely missing, you can add them using this form.