The role of matching grants as a commitment device in the federation model with a repeated soft budget setting

Nobuo Akai () and Motohiro Sato
Additional contact information
Nobuo Akai: Osaka University
Motohiro Sato: Hitotsubashi University

Economics of Governance, 2019, vol. 20, issue 1, No 2, 23-39

Abstract: Abstract This paper revisits the soft budget versus the hard budget constraint in federations. By extending Besfamille and Lockwood (Int Econ Rev 49:577–593, 2008), who examine a case where the soft budget is ex ante favorable, we consider a model that allows the federal government to use a matching grant as an ex post policy instrument. We establish that this instrument acts as a commitment device and may improve social welfare compared with the situation in which the government’s ex ante policy options are limited to a hard or soft budget.

Keywords: Soft budget; Matching grant; Repeated game; Commitment device (search for similar items in EconPapers)
JEL-codes: H71 H72 H73 H77 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s10101-019-00221-7 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:ecogov:v:20:y:2019:i:1:d:10.1007_s10101-019-00221-7

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10101/PS2

DOI: 10.1007/s10101-019-00221-7

Access Statistics for this article

Economics of Governance is currently edited by Amihai Glazer and Marko Koethenbuerger

More articles in Economics of Governance from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().