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Voters as a hard budget constraint: On the determination of intergovernmental grants

Author

Listed:
  • Lars P. Feld

    () (Faculty of Business Administration and Economics, Philipps Universitaet Marburg)

  • Christoph A. Schaltegger

    (Swiss Federal Tax Administration and CREMA)

Abstract

Recent empirical literature has shown that the determination of intergovernmental grants is highly influenced by the political bargaining power of the recipient states. In these models federal politicians are assumed to buy the support of state voters, state politicians and state interest groups by providing grants. In this paper we provide evidence that the fiscal referendum reduces the reliance of states on matching grants received from the central government and thus the possibility of state interest groups and state bureaucrats to obtain more grants. If referendums are available, voters serve as a hard budget constraint.

Suggested Citation

  • Lars P. Feld & Christoph A. Schaltegger, 2004. "Voters as a hard budget constraint: On the determination of intergovernmental grants," Marburg Working Papers on Economics 200418, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  • Handle: RePEc:mar:volksw:200418
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    File URL: http://www.uni-marburg.de/fb02/makro/forschung/gelbereihe/artikel/2004-18-Feld-Schaltegger_gesamt.pdf
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    References listed on IDEAS

    as
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    12. Heyndels, Bruno & Smolders, Carine, 1994. "Fiscal Illusion at the Local Level: Empirical Evidence for the Flemish Municipalities," Public Choice, Springer, vol. 80(3-4), pages 325-338, September.
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Phuong Nguyen-Hoang, 2012. "Fiscal effects of budget referendums: evidence from New York school districts," Public Choice, Springer, vol. 150(1), pages 77-95, January.
    2. Linda Veiga & Maria Pinho, 2007. "The political economy of intergovernmental grants: Evidence from a maturing democracy," Public Choice, Springer, vol. 133(3), pages 457-477, December.
    3. Lars P. Feld & Gebhard Kirchgässner, 2004. "Sustainable Fiscal Policy in a Federal System: Switzerland as an Example," Marburg Working Papers on Economics 200424, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    4. Thushyanthan Baskaran & Zohal Hessami, 2017. "Political alignment and intergovernmental transfers in parliamentary systems: evidence from Germany," Public Choice, Springer, vol. 171(1), pages 75-98, April.
    5. Padovano, Fabio, 2012. "The drivers of interregional policy choices: Evidence from Italy," European Journal of Political Economy, Elsevier, vol. 28(3), pages 324-340.
    6. Jussila Hammes , Johanna & Mandell , Svante, 2016. "Districts’ co-financing of the central government," Working papers in Transport Economics 2016:12, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    7. repec:hpe:journl:y:2016:v:219:i:4:p:35-66 is not listed on IDEAS
    8. Elvina Merkaj & Riccardo Lucchetti & Fabio Fiorillo, 2017. "Winning Competitive Grants For Regional Development in Albania: The Role of Local Leaders," Working Papers 422, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    9. Paulo Roberto Arvate & Marcos Felipe Mendes Lopes, 2007. "Institutional Changes, Incentive Schemes And The Decision To Undertake Fiscal Adjustments," Anais do XXXV Encontro Nacional de Economia [Proceedings of the 35th Brazilian Economics Meeting] 010, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    10. Kauder, Björn & Potrafke, Niklas & Reischmann, Markus, 2016. "Do politicians reward core supporters? Evidence from a discretionary grant program," European Journal of Political Economy, Elsevier, vol. 45(C), pages 39-56.
    11. Kauder, Björn & Björn, Kauder & Niklas, Potrafke & Markus, Reischmann, 2016. "Do politicians gratify core supporters? Evidence from a discretionary grant program," Annual Conference 2016 (Augsburg): Demographic Change 145509, Verein für Socialpolitik / German Economic Association.
    12. Fabio FIORILLO, 2011. "A model on interests representation and;accountability in small local governments," Working Papers 356, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    13. Lars P. Feld & Gebhard Kirchgassner, 2006. "On the Effectiveness of Debt Brakes: The Swiss Experience," CREMA Working Paper Series 2006-21, Center for Research in Economics, Management and the Arts (CREMA).
    14. repec:eee:regeco:v:64:y:2017:i:c:p:1-11 is not listed on IDEAS

    More about this item

    Keywords

    Budget Referendums; Intergovernmental Grants; Interest Group Influence.;

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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