The impact of federal and state grants on local government spending: A test of the fiscal illusion hypothesis
This article offers an empirical test of the fiscal illusion hypothesis. It is argued that, if fiscal illusion increases with the degree of separation in taxing and spending powers, then federal unconditional grants ought to have a greater stimulatory impact on local government spending than state unconditional grants. Data for the 136 counties and cities of Virginia were examined and evidence in support of this hypothesis is provided. Federal grants were found to be the primary source of the stimulatory impact of grants. At the minimum, federal unconditional grants have twice the stimulatory effect as state unconditional grants.
|Date of creation:||1990|
|Date of revision:|
|Publication status:||Published in Public Finance Review July 1990 vol. 18 no. 3 313-327|
|Contact details of provider:|| Postal: |
Web page: http://www.buseco.monash.edu.au/eco/Email:
More information through EDIRC
|Order Information:|| Web: http://www.buseco.monash.edu.au/eco/research/papers/ Email: |
When requesting a correction, please mention this item's handle: RePEc:mos:moswps:archive-11. 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: (Simon Angus)
If references are entirely missing, you can add them using this form.