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Why Not Fully Spend a Conditional Block Grant?

Author

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  • Faber, Riemer

    () (CPB Netherlands Bureau for Economic Policy Analysis)

  • Koning, Pierre

    () (Leiden University)

Abstract

This paper studies a conditional block grant that Dutch municipalities receive for welfare-to-work programs. Many municipalities do not fully use this grant, although programs are beneficial for them. We argue that municipalities incur expenses to use the grant. If these costs are substantial, then it is optimal not to fully use the grant. Based on municipality-specific data on grants and actual expenditures, we estimate that municipalities have to add about 90 cents from their own resources to spend 1 euro of the grant. As a result, the conditional block grant is de facto a closed-ended matching grant.

Suggested Citation

  • Faber, Riemer & Koning, Pierre, 2012. "Why Not Fully Spend a Conditional Block Grant?," IZA Discussion Papers 6712, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6712
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    Cited by:

    1. Linda Toolsema & Maarten Allers, 2014. "Welfare Financing: Grant Allocation and Efficiency," De Economist, Springer, vol. 162(2), pages 147-166, June.
    2. Koning, Pierre, 2013. "Making Work Pay for the Indebted: The Effect of Debt Services on the Exit Rates of Unemployed Individuals," IZA Discussion Papers 7873, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    intergovernmental grants; conditional block grants; welfare-to-work programs;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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