Price-shifting fungibility
Bibliographic Data
| ID | 7366440 |
|---|---|
| Authors | Salvatore Barbaro (0000-0002-4203-7595, corresponding author) |
| Year | 2022 |
| Volume | 9 |
| Issue | 1 |
| Pages | 93-109 |
| Publication date | 2022-02-24 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Regional Studies Regional Science (JOURNAL) |
| Journal identifiers | ISSN: 2168-1376 • E-ISSN: 2168-1376 |
| Publisher | Taylor & Francis (PUBLISHER • GB) |
| DOI | 10.1080/21681376.2022.2030789 |
| OpenAlex | W4213420159 |
| Language | EN |
| References cited | 25 |
Unconditional intergovernmental grants are popular with economists but increasingly rarely observed in practice. Conversely, earmarking grants became a common form of the centres’ support to states in federalist countries, though they are seriously flawed by welfare loss induced by the intended reallocation of states’ provision of goods and services. Conditional grants bring states’ governments a dilemma: intergovernmental grants increase states’ revenues and enhance welfare, but the revenue gain is paid with amendments on the expenditure side, which harms welfare. We introduce the notion of price-shifting fungibility. It describes the effect of grant-receiving states minimizing the distortionary impact of conditional grants by lowering the prices or quality of the targeted good. By reducing the expenditure for the subsidized good, states create financial leeway to promote goods and services other than the targeted interest. By doing so, they can compensate for the welfare loss caused by conditional grants. We provide a simple theoretical model and some empirical evidence
Economics · Fungibility · Macroeconomics · Microeconomics · Local Government Finance and Decentralization
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Fungibility of Matching Conditional Grants to Local Governments
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Electoral Politics as a Redistributive Game
Fiscal Federalism in Germany
Building a National Economy
Fiscal Federalism and Economic Crises in the United States
| Citation velocity | historical |
|---|---|
| Highly cited | No |