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The economics of choice in the allocation of Federal grants: An empirical test

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  • John Gist
  • R. Hill

Abstract

In this paper, we have provided strong evidence in favor of the Niskanen model of bureaucratic behavior and against the ‘public interest’ hypothesis by considering the selection process used by HUD in awarding Urban Development Action Grants. Specifically, we did not find that any distress measures specified in regulations dealing with the program were statistically significant in explaining the awarding of grants. The only consistently significant factors of those considered were the level of private commitment to the project and the ratio of private funds committed to total amount requested. We argue that use of these variables, especially the latter, as primary selection criteria by HUD bureaucrats reflects their desire to enhance their budgetary environment by making what the market perceives to be the best investments available to them, avoiding risk and spreading available UDAG funds as widely as possible. We conclude that HUD officials may attempt to limit the number of projects in severely distressed cities (despite contrary regulations) and to maximize the spread of available resources among funded projects. Copyright Martinus Nijhoff Publishers bv 1981

Suggested Citation

  • John Gist & R. Hill, 1981. "The economics of choice in the allocation of Federal grants: An empirical test," Public Choice, Springer, vol. 36(1), pages 63-73, January.
    • Handle: RePEc:kap:pubcho:v:36:y:1981:i:1:p:63-73
    DOI: 10.1007/BF00163771
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    Cited by:

    1. J R Bohland & J Gist, 1983. "The Spatial Consequences of Bureaucratic Decisionmaking," Environment and Planning A, , vol. 15(11), pages 1489-1500, November.
    2. Paul R. Zimmerman, 2004. "State executions, deterrence, and the incidence of murder," Journal of Applied Economics, Universidad del CEMA, vol. 7, pages 163-193, May.
    3. Gawel, Erik & Heuson, Clemens & Lehmann, Paul, 2012. "Efficient public adaptation to climate change: An investigation of drivers and barriers from a Public Choice perspective," UFZ Discussion Papers 14/2012, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    4. Brunner, Norbert & Lele, Ashwini & Starkl, Markus & Grassini, Laura, 2010. "Water sector reform policy of India: Experiences from case studies in Maharashtra," Journal of Policy Modeling, Elsevier, vol. 32(4), pages 544-561, July.
    5. Gershon Alperovich, 1984. "The economics of choice in the allocation of intergovernmental grants to local authories," Public Choice, Springer, vol. 44(2), pages 285-296, January.
    6. Ralph C. Allen & Jack H. Stone, 2001. "Rent extraction, principal-agent relationships, and pricing strategies: vendor licensing during the 1996 Olympic Games in Atlanta," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 22(8), pages 431-438.
    7. Linda Gonçalves Veiga & Maria Manuel Pinho, 2005. "The Political Economy of Portuguese Intergovernmental Grants," NIPE Working Papers 8/2005, NIPE - Universidade do Minho.

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