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Size, spillovers and soft budget constraints
International monetary fund, Washington DC, USA.
University of Bonn, Germany. (Nationalekonomi)ORCID iD: 0000-0003-3719-8594
2013 (English)In: International Tax and Public Finance, ISSN 0927-5940, E-ISSN 1573-6970, Vol. 20, no 2, p. 338-356Article in journal (Refereed) Published
Abstract [en]

There is much evidence against the so-called “too big to fail” hypothesis in the case of bailouts to subnational governments. We look at a model where districts of different size provide local public goods with positive spillovers. Matching grants of a central government can induce socially-efficient provision, but districts can still exploit the intervening central government by inducing direct financing. We show that the ability and willingness of a district to induce a bailout and district size are negatively correlated. Furthermore, we argue that these policies can be equilibrium strategies.

Place, publisher, year, edition, pages
Dordrecht: Springer Netherlands, 2013. Vol. 20, no 2, p. 338-356
Keyword [en]
Bailouts; Soft budget constraints; District size; Spillovers
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:kau:diva-45627DOI: 10.1007/s10797-012-9230-3ISI: 000316205500008OAI: oai:DiVA.org:kau-45627DiVA, id: diva2:957375
Available from: 2016-09-01 Created: 2016-09-01 Last updated: 2018-03-13Bibliographically approved

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CiteExportLink to record
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Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
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  • asciidoc
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