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Free-Riding and Intergovernmental Grants

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  • Breton, Albert
  • Fraschini, Angela

Abstract

This paper argues that to associate intergovernmental grants with the objectives of equity and efficiency implies that governments are irrational. The authors find long-term systematic irrationality in the behavior of any institution difficult to accept. The authors, therefore, propose that the factors which determine expenditure concentration in governmental systems are different and independent of the factors that control revenue concentration, so that the two will, in general, be different. When expenditure concentration is smaller than revenue concentration, budgetary balance will require intergovernmental grants. The authors stress that the "demand" for grants originates with junior governments and that it creates a standard agency problem which can be remedied by making intergovernmental grants conditional. Copyright 1992 by WWZ and Helbing & Lichtenhahn Verlag AG

Suggested Citation

  • Breton, Albert & Fraschini, Angela, 1992. "Free-Riding and Intergovernmental Grants," Kyklos, Wiley Blackwell, vol. 45(3), pages 347-361.
    • Handle: RePEc:bla:kyklos:v:45:y:1992:i:3:p:347-61
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    Cited by:

    1. Beate Jochimsen, 2009. "Service Quality in Modern Bureaucracy: Parkinson's Theory at Work," Kyklos, Wiley Blackwell, vol. 62(1), pages 44-64, February.
    2. FG Mixon Jr & DL Hobson, 2001. "Intergovernmental Grants And The Positioning Of Presidential Primaries And Caucuses: Empirical Evidence From The 1992, 1996, And 2000 Election Cycles," Contemporary Economic Policy, Western Economic Association International, vol. 19(1), pages 27-38, January.

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