Resource title

Using a discontinuous grant to identify the effect of grants on local taxes and spending

Resource image

image for OpenScout resource :: Using a discontinuous grant to identify the effect of grants on local taxes and spending

Resource description

When investigating the effects of federal grants on the behavior of lower-level governments, it is hard to defend the handling of grants as an exogenous factor affecting local governments; federal governments often set grants based on characteristics and performance of local governments. In this paper we make use of a discontinuity in the Swedish grant system in order to estimate the causal effects of general intergovernmental grants on local spending and local tax rates. The formula for the distribution of funds is used as an exclusion restriction in an IV-estimation. We find evidence of crowding-in, where federal grants are shifted to more local spending, but not to reduced local tax rates. Our results thus confirm a flypaper effect for Sweden.

Resource author

Matz Dahlberg, Eva Mörk, Jørn Rattsø

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25901

Resource license

Adapt according to the presented license agreement and reference the original author.