Matching Grants and Ricardian Equivalence
Charles Figuieres () and
Jean Hindriks ()
No 440, Working Papers from Queen Mary University of London, School of Economics and Finance
This paper questions the effectiveness of matching grants to correct for interjurisdictional spillovers in the light of Bernheim general neutrality result. Indeed this result suggests that the usual argument that matching grants are needed to internalize the externality arising from the existence of interjuridictional spillovers is an artifact of the assumption that jurisdictions neglect the impact that their decisions have on the federal budget. Relaxing this assumption and using a classical model where the arbitrage resulting from labor mobility implies that redistribution has the properties of a public good, we find that matching grants are relevant although much less effective. We also find that optimal matching rates are independent of the jurisdictions' choice of policy variable contrarily to the case where jurisdictions ignore the impact of their decisions on the federal budget.
Keywords: Fiscal federalism; Ricardian equivalence; Matching grants (search for similar items in EconPapers)
JEL-codes: H23 H70 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 404 Not Found
Journal Article: Matching grants and Ricardian equivalence (2002)
Working Paper: Matching grants and Ricardian equivalence (2002)
Working Paper: Matching grants and Ricardian equivalence (2001)
Working Paper: Matching Grants and Ricardian Equivalence (2001)
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:qmw:qmwecw:wp440
Access Statistics for this paper
More papers in Working Papers from Queen Mary University of London, School of Economics and Finance Contact information at EDIRC.
Bibliographic data for series maintained by Nicholas Owen ( this e-mail address is bad, please contact ).