Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/24556
Authors: 
Hauptmeier, Sebastian
Year of Publication: 
2007
Series/Report no.: 
ZEW Discussion Papers 07-006
Abstract: 
This paper uses a simple model of fiscal competition between local jurisdictions to analyse the impact of intergovernmental grants on the composition of public spending. We find that a higher degree of redistribution within a system of ?fiscal equalisation? coincides with a smaller overall share of spending on productivity-enhancing public inputs. Furthermore, in order to test the theoretical predictions, we carry out an empirical analysis based on a panel of German states. The results are consistent with the theoretical findings and support the existence of an incentive effect of intergovernmental grants on state expenditure policies.
Subjects: 
Fiscal competition
Fiscal equalisation
Intergovernmental grants
Public expenditure
Germany
JEL: 
H72
H77
Document Type: 
Working Paper

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