Do Intergovernmental Grants Improve Public Service Delivery in Developing Countries?

Cassidy, Traviss (2017): Do Intergovernmental Grants Improve Public Service Delivery in Developing Countries?

Abstract

I exploit unusual policy variation in Indonesia to examine how local responses to intergovernmental grants depend on their persistence. A national reform produced permanent increases in the general grant that were larger for less densely populated districts. Hydrocarbon-rich districts experienced transitory shocks to shared resource revenue. Public service delivery strongly responded to the permanent shock, but not to the transitory shocks, consistent with districts providing lumpy public services as a function of lifetime fiscal resources. I provide supporting evidence for this mechanism and rule out other potential mechanisms. I discuss implications for decentralization policy and research on taxation and accountability.

• Item Type: MPRA Paper
• Language: English
• Keywords: Intergovernmental grants, public goods, flypaper effect, resource curse
• Subjects: H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H72 - State and Local Budget and Expenditures; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H75 - State and Local Government: Health ; Education ; Welfare ; Public Pensions; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H77 - Intergovernmental Relations ; Federalism ; Secession; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q38 - Government Policy

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