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Title:Size and soft budget constraints PDF Logo
Authors:Crivelli, Ernesto
Staal, Klaas
Issue Date:2006
Series/Report no.:CESifo working paper 1858
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.
JEL:H4
H7
R1
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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