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State Fiscal Responses to Federal Government Grants
Author(s) -
STOTSKY JANET G.
Publication year - 1991
Publication title -
growth and change
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.657
H-Index - 55
eISSN - 1468-2257
pISSN - 0017-4815
DOI - 10.1111/j.1468-2257.1991.tb00552.x
Subject(s) - government (linguistics) , state (computer science) , state government , public economics , economics , block grant , matching (statistics) , fiscal federalism , social welfare , function (biology) , public administration , welfare , local government , political science , law , market economy , decentralization , philosophy , linguistics , statistics , mathematics , algorithm , evolutionary biology , computer science , biology
This paper examines the effect of federal government grants on state fiscal decisions. The study presents a disaggregated analysis of state government that allows for the precise measurement of important fiscal effects. State government is modeled as maximizing a social welfare function defined over government expenditures and taxes. The positive theory of grant response is tested and confirmed. The results indicate that matching grants stimulate government expenditures more than nonmatching grants. The results also suggest that federal grant cutbacks will lead to reductions in state expenditures for all key programs but that the composition of this change will depend on the nature of the federal cutbacks.