Fiscal Federalism in a Dynamic Model

Du Du and Heng-Fu Zou ()
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Du Du: Department of applied economics, Peking University

No 59, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics

Abstract: This paper outlines a dynamic model with three levels of government: federal, state and local in the Stackelberg game structure with the superor government as the leader and all its subordinate governments the followers.It studies the optimal design of block grants and matching grants from both the federal government and the state governments to their numerous subordinate governments respectively as well as the optimal public expendtures and public capital stocks of di¡èerent levels of government in the long run. Using speci?c form of utility function, we ?nd that the optimal intergovernmental grants are very di¡èerent between the level of federal government and state governments.

Keywords: Block grants; Matching grants; Public spending; Public capital stocks; Public investment (search for similar items in EconPapers)
Pages: 25 pages
Date: 2001-08
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:wpaper:59

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