Optimal design of intergovernmental grants in a dynamic model

Zou, Heng-fu (2012): Optimal design of intergovernmental grants in a dynamic model.

Abstract

This paper outlines a dynamic model with three levels of government: federal, state and local in the Stackelberg game structure with the superor government as the leader and all its subordinate governments the followers.It studies the optimal design of block grants and matching grants from both the federal government and the state governments to their numerous subordinate governments respectively as well as the optimal public expendtures and public capital stocks of different levels of government in the long run. Using specific form of utility function, we find that the optimal intergovernmental grants are very different between the level of federal government and state governments.

• Item Type: MPRA Paper
• Language: English
• Keywords: Block grants; Matching grants; Public spending; Public capital stocks; Public investment
• Subjects: H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H77 - Intergovernmental Relations ; Federalism ; Secession; H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government; H - Public Economics > H5 - National Government Expenditures and Related Policies > H53 - Government Expenditures and Welfare Programs

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