When does money stick in education? Evidence from a kinked grant rule
Antti Saastamoinen and
No 102, Working Papers from VATT Institute for Economic Research
We study the effects of intergovernmental grants on school spending within the Finnish system of high school education funding. The system allocates lump-sum intergovernmental grants to local education organizers using a kinked grant rule. Utilizing the quasi-experimental variation in grants given by the rule, we identify the effects of grants on municipal high school education expenditures. Our results indicate that grants stimulate spending while local tax rates or revenues do not seem to be responsive to grants, thus suggesting the presence of a typical flypaper effect. However, we also consider the possibility that grant responses might be heterogeneous among municipalities. Based on our heterogeneity results, the grant response is positively associated with the share of high school age population, while the higher share of elderly is related to a lower propensity to spend on education out of grant funding. This result is in line with the idea of intergenerational conflict in education spending preferences often presented in education finance literature.
Keywords: intergovernmental transfers; flypaper effect; heterogeneous spending preferences; regression kink design; Local public finance and provision of public services; I22; H75; H73 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-edu and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fer:wpaper:102
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Working Papers from VATT Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Anita Niskanen ().