Capital-intensive projects induce more effort than labor-intensive projects

Amihai Glazer and Stef Proost

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: Central governments often subsidize capital spending by local governments, instead of subsidizing operating expenses or labor-intensive projects. This paper offers one explanation, focusing on the incentive effects for local officials. a local official can more easily shift the cost of optimizing a project to his successor on a labor-intensive project than on a capital-intensive project.

Date: 2008-12
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Working Paper: Capital-Intensive Projects Induce More Effort Than Labor-Intensive Projects (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces0831

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