Abstract
Intergovernmental grants allow centralized governments to ensure that decentralized units have sufficient funds to make available a minimal level of a particular good to all constituents, or to induce decentralized governments (which I refer to as “localities”) to produce a greater level of public goods than they would produce if they employed only internally generated funds. (1984) distinguishes four reasons for making grants: (1) to encourage localities to take account of the external effects of their services; (2) to enforce grantor preferences; (3) to correct for fiscal imbalance between the various tiers of government (revenue sharing); and (4) for equalization. I refer to grants that satisfy any of these conditions as an “ideal” grant and to the requirements that the central government imposes for use of the grant and the ways in which the locality expends grant funds as the “terms” of the grant. Although grants are not costless, in that they require additional bureaucracies at both the central and decentralized levels, ideal grants promote either efficiency or distributional goals within a multi-tiered political system.
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Gillette, C.P. (2004). Constraining Misuse of Funds From Intergovernmental Grants: A Legal Analysis. In: Molander, P. (eds) Fiscal Federalism in Unitary States. ZEI Studies in European Economics and Law, vol 6. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-0503-7_5
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