Arbeitspapier
Optimal Design of Intergovernmental Grants under Asymmetric Information
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 decentralized with the help of categorical block grants and closed-ended matching grants, but not with unconditional block grants or open-ended matching grants.
- Language
-
Englisch
- Bibliographic citation
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Series: CESifo Working Paper ; No. 919
- Classification
-
Wirtschaft
- Subject
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asymmetric information
categorical block grants
closed-ended matching grants
- Event
-
Geistige Schöpfung
- (who)
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Huber, Bernd
Runkel, Marco
- Event
-
Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
-
2003
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
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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
- Huber, Bernd
- Runkel, Marco
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2003
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