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Title:Conditional grants to independent regional governments: The trade-off between incentives and wasteful grant-seeking PDF Logo
Authors:Bischoff, Ivo
Blaeschke, Frédéric
Issue Date:2010
Series/Report no.:Joint discussion paper series in economics 30-2010
Abstract:The paper addresses the welfare implications of conditional grants in the presence of inefficiencies in regional production. While conditional grants may set incentives for regions to reduce inefficiencies, resources are wasted in the process of grant-seeking. We provide a theoretical model to assess the net effect on welfare. A game-theoretic context is developed to derive the optimal grant-distribution scheme. Depending on the characteristics of the collective good and of the regional government, the optimal ratio of conditional to block grants and the optimal number of recipients vary. The impact of different factors on the optimal grant-distribution scheme is derived.
Subjects:conditional grants
inefficiencies
rent-seeking
fiscal federalism
opportunistic government
JEL:D7
H77
H5
H11
Document Type:Working Paper
Appears in Collections:MAGKS Joint Discussion Paper Series in Economics, Universität Marburg

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