Conditional grants to independent regional governments: The trade-off between incentives and wasteful grant-seeking

Ivo Bischoff () and Frédéric Blaeschke
Additional contact information
Frédéric Blaeschke: University of Kassel

No 201030, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: The paper addresses the welfare implications of conditional grants in the presence of inefficiencies in regional production. While conditional grants may set incentives for regions to reduce inefficiencies, resources are wasted in the process of grant-seeking. We provide a theoretical model to assess the net effect on welfare. A game-theoretic context is developed to derive the optimal grant-distribution scheme. Depending on the characteristics of the collective good and of the regional government, the optimal ratio of conditional to block grants and the optimal number of recipients vary. The impact of different factors on the optimal grant-distribution scheme is derived.

Keywords: conditional grants; inefficiencies; rent-seeking; fiscal federalism; opportunistic government (search for similar items in EconPapers)
JEL-codes: D7 H11 H5 H77 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2010
New Economics Papers: this item is included in nep-geo and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations:

Forthcoming in

Downloads: (external link)
https://www.uni-marburg.de/en/fb02/research-groups ... 30-2010_bischoff.pdf First version, 2010 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201030

Access Statistics for this paper

More papers in MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) Contact information at EDIRC.
Bibliographic data for series maintained by Bernd Hayo ().