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Using a discontinuous grant rule to identify the effect of grants on local taxes and spending
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics. Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Institute for Housing and Urban Research.
Uppsala University, Units outside the University, Office of Labour Market Policy Evaluation.
NTNU, Trondheim.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2008 (English)In: Journal of Public Economics, ISSN 0047-2727, E-ISSN 1879-2316, Vol. 92, no 12, 2320-2335 p.Article in journal (Refereed) Published
Abstract [en]

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. Federal governments often set grants based on characteristics and performance of decentralized 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.

Place, publisher, year, edition, pages
Elsevier , 2008. Vol. 92, no 12, 2320-2335 p.
Keyword [en]
Fiscal federalism, grants, local taxation, local government expenditure, causal effects, discontinuity analysis
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:uu:diva-88787DOI: 10.1016/j.jpubeco.2007.05.004ISI: 000261592300004OAI: oai:DiVA.org:uu-88787DiVA: diva2:159087
Conference
CESifo-IFIR Conference New Directions in Fiscal Freedom; Lexington, KY, USA; 14-6 September, 2006
Available from: 2009-02-09 Created: 2009-02-06 Last updated: 2013-06-27Bibliographically approved

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Dahlberg, MatzMörk, Eva

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