Externalities and Bailouts: Hard and Soft Budget Constraints in Intergovernmental Fiscal Relations
Central government matching grants can, in principle, induce socially- efficient provision of local public goods that produce spillover benefits. Local underprovision of public goods may however elicit direct central-government provision and finance (a ``bailout") that makes local residents better off than under grant-subsidized local provision; local underprovision that induces bailouts reveals the local budget constraint to be ``soft." Simulations suggest that the ability of a locality to extract a welfare-improving bailout depends positively on its size: budget constraints are more likely to be ``hard" for small localities.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- von Hagen, Jurgen, 1991.
"A note on the empirical effectiveness of formal fiscal restraints,"
Journal of Public Economics,
Elsevier, vol. 44(2), pages 199-210, March.
- von Hagen,Juergen, "undated". "A note on the empirical effectiveness of formal fiscal restraints," Discussion Paper Serie B 155, University of Bonn, Germany.
- Inman, Robert P, 1995. "How to Have a Fiscal Crisis: Lessons from Philadelphia," American Economic Review, American Economic Association, vol. 85(2), pages 378-383, May.
- Bahl, Roy W. & Wallich, Christine, 1992. "Intergovernmental fiscal relations in China," Policy Research Working Paper Series 863, The World Bank.
- Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476.
- James M. Poterba, 1993.
"State Responses to Fiscal Crisis: The Effects of Budgetary Institutionsand Politics,"
NBER Working Papers
4375, National Bureau of Economic Research, Inc.
- Poterba, James M, 1994. "State Responses to Fiscal Crises: The Effects of Budgetary Institutions and Politics," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 799-821, August.
- McKinnon, Ronald I., 1995. "Intergovernmental competition in Europe with and without a common currency," Journal of Policy Modeling, Elsevier, vol. 17(5), pages 463-478, October.
- Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1991.
"The Pure Theory of Country Risk,"
in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 391-435
National Bureau of Economic Research, Inc.
- Mathias Dewatripont & Eric Maskin, 2004.
"Credit and efficiency in centralized and decentralized economies,"
ULB Institutional Repository
2013/9605, ULB -- Universite Libre de Bruxelles.
- M. Dewatripont & E. Maskin, 1995. "Credit and Efficiency in Centralized and Decentralized Economies," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 541-555.
- Mathias Dewatripont & Eric Maskin, 1995. "Credit and efficiency in centralized and decentralized economies," ULB Institutional Repository 2013/9603, ULB -- Universite Libre de Bruxelles.
- Dennis Epple & Katherine Schipper, 1981. "Municipal pension funding: A theory and some evidence," Public Choice, Springer, vol. 37(1), pages 141-178, January.
- Kornai, Janos, 1986.
"The Soft Budget Constraint,"
Wiley Blackwell, vol. 39(1), pages 3-30.
- Jonathan Eaton & Mark Gersovitz, 1987. "Country Risk and the Organization of International Capital Transfer," NBER Working Papers 2204, National Bureau of Economic Research, Inc.
- Alberto F. Ades & Edward L. Glaeser, 1995. "Trade and Circuses: Explaining Urban Giants," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 195-227.
- Prud'homme, Remy, 1995. "The Dangers of Decentralization," World Bank Research Observer, World Bank Group, vol. 10(2), pages 201-220, August.
- Ernst-Ludwig von Thadden, 1995. "Long-Term Contracts, Short-Term Investment and Monitoring," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 557-575.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwppe:0112002. 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: (EconWPA)
If references are entirely missing, you can add them using this form.