Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/93892 
Year of Publication: 
2006
Series/Report no.: 
SFB/TR 15 Discussion Paper No. 172
Publisher: 
Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY), München
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
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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