The central government grant allocation problem in the presence of misrepresentation and cheating

Guy Gilbert () and Yvon Rocaboy

Economics of Governance, 2004, vol. 5, issue 2, 137-147

Abstract: This study deals with the central government grant allocation problem under conditions of asymmetric information. Using a simple model, we examine herein the optimal design of random audit and incentive mechanisms to encourage the grantee (the local government authority) to report truthfully on local parameters required in the granting process. The local government authority must choose between two possibilities: a menu of contracts that could be considered as a matching grant programme with random auditing vs. a lump-sum grant without any audit mechanism. We will show that addressing the optimal grant system problem is similar to comparing slopes on the graph of the indirect local government welfare function at two distinct points. Copyright Springer-Verlag Berlin/Heidelberg 2004

Keywords: Auditing procedures; matching grant; lump-sum grant; public goods; local government (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:spr:ecogov:v:5:y:2004:i:2:p:137-147

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DOI: 10.1007/s10101-004-0071-0

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