While the literature on how intergovernmental grants affect the budget of receiving jurisdictions is numerous, the very few studies that explicitly deal with likely endogeneity problems focus on grants targeted towards specific sectors or to specific type of recipients. The results from these...

In a Regression Kink (RK) design with a finite sample, a confounding smooth nonlinear relationship between an assignment variable and an outcome variable around a threshold can be spuriously picked up as a kink and result in a biased estimate. In order to investigate how well RK designs handle...

This paper first formulates a model of how the politicians in a local government collectively lobby to raise intergovernmental grants to their local government. The model identifies a relationship between council size and grants received. I then study this relationship empirically using the...

In this paper, we test one of the fundamental assumptions in the tax competition literature, namely, that a country's taxable income depends on the tax policies pursued in the domestic and in neighbouring countries. Based on a panel of annual data of 14 Western European countries spanning the...

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...

An in-kind subsidy is equivalent, both theoretically and empirically, to an increase of income for an individual consumer. But the equivalence does not empirically carry over to in-kind grants by a central government to a local one: this has been seen as an anomaly and dubbed the â??flypaper...

This study tests for strategic competition in public spending on childcare and primary education, and care for the elderly, using panel data on Swedish municipalities over 1996-2005. The high degree of decentralization in the organization of the public sector implies that Swedish data is highly...

We analyze a model where the federal government provides risk sharing arrangements to municipalities investing in a local public good. The risk sharing arrangements are an income equalization system and a system allowing for a soft budget constraint, i.e., a bailout. Our main result is that a...

Central government bailouts of local governments are commonly viewed as a recipe for local fiscal indiscipline, as local governments learn that the center will come to the rescue in times of trouble. However, little is known about the consequences of bailouts granted conditional on local...

This study tests for strategic competition in public spending on childcare and primary education, and care for the elderly, using panel data on Swedish municipalities over 1996-2005. The high degree of decentralization in the organization of the public sector implies that Swedish data is highly...