EXTERNALITIES AND BAILOUTS Hard and Soft Budget Constraints in Intergovernmental Fiscal Relations

@inproceedings{Wildasin1997EXTERNALITIESAB,
  title={EXTERNALITIES AND BAILOUTS Hard and Soft Budget Constraints in Intergovernmental Fiscal Relations},
  author={David E. Wildasin},
  year={1997}
}
Central government matching grants can, in principle, induce socially-e cient provision of local public goods that produce spillover bene ts. Local underprovision of public goods may however elicit direct central-government provision and nance (a \bailout") that makes local residents better o than under grant-subsidized local provision; local underprovision that induces bailouts reveals the local budget constraint to be \soft." Simulations suggest that the ability of a locality to extract a… CONTINUE READING
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