The Decision to Grant

Why does Congress design some programs as grants to states, thereby relinquishing some control over how federal money gets spent, while designing other programs to be administered centrally? We evaluate this question empirically, finding that one reason Congress chooses a grant design for new programs is when the complexity of state and local spending in a sector is high. When the existing network of programs in a sector is large, with numerous programs potentially overlapping using a grant design for new programs has the potential to enhance the coordination and integration of program resources.