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The stimulative effect of an unconditional block grant on the decentralized provision of care

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  • Kattenberg, Mark
  • Vermeulen, Wouter

Abstract

Understanding the impact of central government grants on decentralized healthcare provision is of crucial importance for the design of grant systems, yet empirical evidence on the prevalence of flypaper effects in this domain is rare. We study the decentralization of home care in the Netherlands and exploit the gradual introduction of formula-based equalization to identify the effect of exogenous changes in an unconditional block grant on local expenditure and utilization. A one euro increase in central government grants raises local expenditure by twenty to fifty cents. Adjustments occur through the number of hours as well as through substitution between basic and more advanced types of assistance. These findings suggest that conditioning of grants is not required for the central government to retain a moderate degree of control over the decentralized provision of care.

Suggested Citation

  • Kattenberg, Mark & Vermeulen, Wouter, 2017. "The stimulative effect of an unconditional block grant on the decentralized provision of care," LSE Research Online Documents on Economics 86956, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:86956
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    Cited by:

    1. Remco van Eijkel & Mark Kattenberg & Ab van der Torre, 2018. "Competition and pricing behavior in long term care markets: Evidence from the Market for Assistance in Daily Housekeeping Activities," CPB Discussion Paper 373, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Mark Kattenberg & Pieter Bakx, 2018. "Are substitute services a barrier to controlling long-term care expenditures?," CPB Discussion Paper 382.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Mark Kattenberg & Pieter Bakx, 2018. "Are substitute services a barrier to controlling long-term care expenditures?," CPB Discussion Paper 382, CPB Netherlands Bureau for Economic Policy Analysis.
    4. Mark Kattenberg & Pieter Bakx, 2021. "Substitute services: a barrier to controlling long-term care expenditures," European Journal of Ageing, Springer, vol. 18(1), pages 85-97, March.

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    More about this item

    Keywords

    Intergovernmental transfers; Flypaper effect; Decentralization of health care;
    All these keywords.

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare

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