Vertical Grants and Local Public Efficiency: The Inference-disturbing Effect of Fiscal Equalization
| Autor: | Peter Haug, Annette Illy, Ivo Bischoff, Peter Bönisch |
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| Rok vydání: | 2017 |
| Předmět: | |
| Zdroj: | Public Finance Review. 47:558-584 |
| ISSN: | 1552-7530 1091-1421 |
| Popis: | The existing empirical literature on the impact of vertical grants on local public-sector efficiency yields mixed results. Given the fact that vertical financial equalization systems often reduce differences in fiscal capacity, we argue that empirical studies based on cross-sectional data may yield a positive relationship between grants and efficiency of public service production even when the underlying causal effect is not. We provide a simple illustrative theoretical model to show the logic of our argument and illustrate its relevance by an empirical case study for the German state of Saxony-Anhalt. We show that our main argument of an inference-disturbing effect applies to those existing studies that are more optimistic about the impact of vertical grants. Finally, we argue that it may disturb the inference drawn from studies in a number of other countries where vertical grants—intended or not—concentrate in fiscally weak municipalities. |
| Databáze: | OpenAIRE |
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