Why not fully spend a conditional block grant?

Riemer P. Faber () and Pierre Koning
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Riemer P. Faber: Charles River Associates, European Competition Practice

International Tax and Public Finance, 2017, vol. 24, issue 1, No 3, 60-95

Abstract: Abstract This paper studies a conditional block grant that Dutch municipalities receive for welfare-to-work programs. Many municipalities do not fully use this grant, although programs are beneficial for them. We argue that municipalities incur expenses to use the grant. If these costs are substantial, then it is optimal not to fully use the grant. Based on municipality-specific data on grants and actual expenditures, we estimate that municipalities have to add about 90 cents from their own resources to spend 1 euro of the grant. As a result, the conditional block grant is de facto a closed-ended matching grant.

Keywords: Intergovernmental grants; Conditional block grants; Welfare-to-work programs (search for similar items in EconPapers)
JEL-codes: H20 H71 H77 I38 (search for similar items in EconPapers)
Date: 2017
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Related works:
Working Paper: Why Not Fully Spend a Conditional Block Grant? (2012)
Working Paper: Why Not Fully Spend a Conditional Block Grant? (2012)
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DOI: 10.1007/s10797-016-9397-0

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