Arbeitspapier
The Impact of Intergovernmental Grants on Cost Efficiency: Theory and Evidence from German Municipalities
In this paper we use a simple bureaucracy model of fiscal illusion to analyze the impact of intergovernmental grants on the cost efficiency of local jurisdictions. We find that a higher degree of redistribution within a system of fiscal equalization or an increase in the amount of grants received by a local jurisdiction leads to an extension of organizational slack or X-inefficiency in that jurisdiction. This theoretical prediction is tested by conducting an empirical analysis using a broad panel of German municipalities. The results of the empirical analysis are consistent with the theoretical findings and therefore support the existence of a negative incentive effect of intergovernmental grants on local authorities' cost efficiency.
- Language
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Englisch
- Bibliographic citation
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Series: ZEW Discussion Papers ; No. 08-051
- Classification
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Wirtschaft
Structure, Scope, and Performance of Government
Intergovernmental Relations; Federalism; Secession
- Subject
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Cost efficiency
Fiscal equalisation
Intergovernmental grants
Bureaucracy
Stochastic frontier analysis
German municipalities
Finanzausgleich
Kommunaler Finanzausgleich
Kommunalverwaltung
Bürokratietheorie
Technische Effizienz
Fiskalillusion
Wirtschaftlichkeit
Theorie
Deutschland
organizational slack
- Event
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Geistige Schöpfung
- (who)
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Kalb, Alexander
- Event
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Veröffentlichung
- (who)
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Zentrum für Europäische Wirtschaftsforschung (ZEW)
- (where)
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Mannheim
- (when)
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2008
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Kalb, Alexander
- Zentrum für Europäische Wirtschaftsforschung (ZEW)
Time of origin
- 2008