The impact of intergovernmental grants on cost effciency : theory and evidence from German municipalities


Kalb, Alexander


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URL: http://ub-madoc.bib.uni-mannheim.de/2083
URN: urn:nbn:de:bsz:180-madoc-20830
Document Type: Working paper
Year of publication: 2008
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: H77 H11 ,
Subject headings (SWD): Deutschland , Finanzausgleich , Kommunaler Finanzausgleich
Keywords (English): Cost effciency , Fiscal equalisation , Intergovernmental grants , Bureaucracy , Stochastic frontier analysis , German municipalities
Abstract: In this paper we use a simple bureaucracy model of fiscal illusion to analyze the impact of intergovernmental grants on the cost efficiency of local jurisdictions. We find that a higher degree of redistribution within a system of fiscal equalization or an increase in the amount of grants received by a local jurisdiction leads to an extension of organizational slack or X-inefficiency in that jurisdiction. This theoretical prediction is tested by conducting an empirical analysis using a broad panel of German municipalities. The results of the empirical analysis are consistent with the theoretical findings and therefore support the existence of a negative incentive effect of intergovernmental grants on local authorities' cost efficiency.
Translation of the title: The impact of intergovernmental grants on cost effciency : theory and evidence from German municipalities (English)
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Kalb, Alexander (2008) The impact of intergovernmental grants on cost effciency : theory and evidence from German municipalities. Open Access [Working paper]
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