Welfare Financing: Grant Allocation and Efficiency

Linda Toolsema () and Maarten Allers

De Economist, 2014, vol. 162, issue 2, 147-166

Abstract: Welfare is often administered locally, but financed through grants from the central government. This raises the question how the central government can prevent local governments from spending more than necessary. We analyze block grants used in The Netherlands, which depend on exogenous spending need determinants and are estimated from previous period welfare spending. We show that, although these grants give rise to perverse incentives by reducing the marginal costs of welfare spending, they are likely to be more efficient than a matching grant, and more equitable than a fixed block grant. Copyright Springer Science+Business Media New York 2014

Keywords: Block grant; Efficiency; Equity; Grant allocation; Welfare financing; H53; H75; H77; I38 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s10645-014-9228-6

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