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Title:Intergovernmental grants and public input provision: theory and evidence from Germany PDF Logo
Authors:Hauptmeier, Sebastian
Issue Date: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
Appears in Collections:Publikationen von Forscherinnen und Forschern des ZEW
ZEW Discussion Papers

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