The Determinants of the Incidence of Intergovernmental Grants: A Survey of the International Experience

Abstract

Although the presence of objective formula-based grants is an important component of a stable, equitable and efficient system of intergovernmental fiscal relations, the final incidence of grants is not always according to what is stated in the formula because there are other intervening institutional factors. Furthermore, the intergovernmental grant mechanism itself is often a function of the same interests or forces that ultimately drive the incidence of grant resources. This paper relates the horizontal allocation of intergovernmental grants directly to their potential underlying determinants, including normative policy issues, voter choice arguments and political considerations. An international comparison of empirical incidence studies reveals that besides local expenditure needs and local fiscal capacity, other factors including political influence and a jurisdiction's size play important and consistent roles in determining the horizontal allocation of per capita intergovernmental grants

Determinants of Resource Allocation: Do Bureaucratic Factors Matter?

“…In Nigeria for instance, no relationship was found between key expenditure needs and governmental grants and in Mexico there was positive relationship between HDI and Environmental Management and Sustainable Development ISSN 2164-7682 2017 governmental transfers. In Tanzania, a positive relationship was found between government allocations and local fiscal capacity (Boex, 2003;Boex and Martinez-Vazquez, 2005;Martin, Pollack and Paltiel, 2006).…”

“…Specifically, they tend to represent political factors with per-capita representation (Atlas et al, 1995;Porto and Sanguinetti, 2001;Boex and Martinez-Vazquez, 2005). This study deviates from the status quo by choosing to use vote pattern as a proxy for political representation.…”

“…In an analysis of a comparative study of twelve countries, evidence was found in virtually all the twelve countries that disproportionate political representation gave rise to consistent intergovernmental transfers (Boex & Martinez-Vazquez, 2005). Findings of Atlas et al (1995) suggested that per capita federal net spending of states was determined by both economic and political factors.…”

Movilidad Intergeneracional Y Gasto Publico en Argentina

“…La variable construida a partir de esta información indica para cada hijo adulto la proporción de años durante su adolescencia o juventud en los que el gobernador de su provincia fue del mismo partido que el presidente al mando. La inclusión de esta variable como control en el modelo empírico se fundamenta principalmente en la evidencia empírica disponible que revela que más allá de las necesidades y capacidades fiscales locales, otros factores relacionados con las influencias políticas juegan un rol importante en la determinación de las asignaciones horizontales de las transferencias intergubernamentales (Boex y Martinez-Vazquez, 2005;Porto y Sanguinetti, 2001, Atlas et al, 1995.…”

Inter-governmental political relations in a federation and illegal mining of natural resources

“…In a related paper, Desai et al (2005) use panel data from 80 Russian regions to show that regional governments are more likely to pursue rent-seeking opportunities when they are more dependent on appropriable rents from resource extraction or from budgetary transfers from the central government as compared to more locally generated revenues. Similarly, Boex and Martinez-Vazquez (2006) conclude from a survey of empirical literature that political influence and the size of a jurisdiction play an important and consistent role in determining the horizontal allocation of inter-governmental grants. 2…”