Optimal design of intergovernmental grants under asymmetric information
Bernd Huber and
Marco Runkel ()
Munich Reprints in Economics from University of Munich, Department of Economics
This paper develops a theoretical explanation why it may be optimal for higher-level governments to pay categorical block grants or closed-ended matching grants to local governments. We consider a federation with two types of local governments which differ in the cost of providing public goods. The federal government redistributes between jurisdictions, but cannot observe the type of a jurisdiction. In this asymmetric information setting, it is shown that the second-best optimum can be implemented with the help of categorical block grants and closed-ended matching grants, but not with unconditional block grants or open-ended matching grants.
References: Add references at CitEc
Citations: View citations in EconPapers (12) Track citations by RSS feed
Published in International Tax and Public Finance 1 13(2006): pp. 25-41
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Journal Article: Optimal Design of Intergovernmental Grants Under Asymmetric Information (2006)
Working Paper: Optimal Design of Intergovernmental Grants under Asymmetric Information (2003)
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:lmu:muenar:19392
Access Statistics for this paper
More papers in Munich Reprints in Economics from University of Munich, Department of Economics Ludwigstr. 28, 80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Tamilla Benkelberg ().