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Title:Size and Soft Budget Constraints PDF Logo
Authors:Crivelli, Ernesto
Staal, Klaas
Issue Date:2006
Series/Report no.:Bonn econ discussion papers 2006,18
Abstract:There is much evidence against the so-called "too big to fail" hypothesis in the case of bailouts to sub-national governments. We look at a model where districts of different size provide local public goods with positive spillovers. Matching grants of a central government can induce socially-efficient provision, but districts can still exploit the intervening central government by inducing direct financing. We show that the ability of a district to induce a bailout from the central government and district size are negatively correlated.
Subjects:bailouts
soft-budget constraints
jurisdictional size
public goods
spillovers
JEL:H4
H7
R1
Document Type:Working Paper
Appears in Collections:Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn

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