 'Hold that Ghost': Using Notches to Identify Manipulation of Population-Based GrantsDirk Foremny, Jordi Jofre-Monseny and Albert Solé-Ollé No 5578, CESifo Working Paper Series from CESifo Abstract: We study local government incentives to misreport the information required to implement a formula grant. We focus specifically on population, in theory the easiest variable for the grantor to verify. We analyze the Spanish case and show how a switch from the use of census to registered population data (the latter administered by the municipalities) led to a manipulation of the population numbers used by central government to allocate grants to municipalities. As a result, registers included a proportion of ‘ghost’ citizens, that is, people who presented no trace of actually residing in the municipality. We identify the effects of grants on population over-reporting taking profit of notches in the grant scheme (i.e., one based on weighted population with the weights increasing at specific population thresholds). We document an excess mass of municipalities to the right of the notch threshold and a density hole to the left of it. There are several indications that manipulation (rather than real population responses) is the mechanism at work. Keywords: intergovernmental transfers; notches; bunching; enforcement (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_5578 Access Statistics for this paper More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC. |
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