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Optimal design of intergovernmental grants in a dynamic model

Author

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  • Zou, Heng-fu

Abstract

This paper outlines a dynamic model with three levels of government: federal, state and local in the Stackelberg game structure with the superor government as the leader and all its subordinate governments the followers.It studies the optimal design of block grants and matching grants from both the federal government and the state governments to their numerous subordinate governments respectively as well as the optimal public expendtures and public capital stocks of different levels of government in the long run. Using specific form of utility function, we find that the optimal intergovernmental grants are very different between the level of federal government and state governments.

Suggested Citation

  • Zou, Heng-fu, 2012. "Optimal design of intergovernmental grants in a dynamic model," MPRA Paper 37427, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:37427
    as

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    File URL: https://mpra.ub.uni-muenchen.de/37427/3/MPRA_paper_37427.pdf
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    References listed on IDEAS

    as
    1. Liutang Gong & Heng-fu Zou, 2003. "Fiscal Federalism, Public Capital Formation, and Endogenous Growth," Annals of Economics and Finance, Society for AEF, vol. 4(2), pages 471-490, November.
    2. Zou Heng-fu, 1994. "Dynamic Effects of Federal Grants on Local Spending," Journal of Urban Economics, Elsevier, vol. 36(1), pages 98-115, July.
    3. Zou, Heng-fu, 1996. "Taxes, Federal Grants, Local Public Spending, and Growth," Journal of Urban Economics, Elsevier, vol. 39(3), pages 303-317, May.
    4. Gong, Liutang & Zou, Heng-fu, 2002. "Optimal taxation and intergovernmental transfer in a dynamic model with multiple levels of government," Journal of Economic Dynamics and Control, Elsevier, vol. 26(12), pages 1975-2003, October.
    5. Zhang, Tao & Zou, Heng-fu, 1998. "Fiscal decentralization, public spending, and economic growth in China," Journal of Public Economics, Elsevier, vol. 67(2), pages 221-240, February.
    6. Robert J. Barro, 2003. "Determinants of Economic Growth in a Panel of Countries," Annals of Economics and Finance, Society for AEF, vol. 4(2), pages 231-274, November.
    7. Robert M. Solow, 2003. "Reflections on Growth and Development," Annals of Economics and Finance, Society for AEF, vol. 4(2), pages 219-229, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. How to design public block and matching grants
      by Economic Logician in Economic Logic on 2012-04-03 20:08:00

    More about this item

    Keywords

    Block grants; Matching grants; Public spending; Public capital stocks; Public investment;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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