Capita Grants Research Articles

Voices from the past: economic and political vulnerabilities in the making of next generation EU

In this article, we show that Next Generation EU (NGEU) is mainly a response to the economic and political imbalances left over from the Eurozone crisis. It is a pre-emptive intervention, especially targeted at structurally weak economies with rising Euroscepticism, to avoid costly ex-post bailouts as in the Great Recession. We demonstrate, using quantitative analysis, that pre-existing vulnerabilities, rather than the impact of the pandemic, drove the allocation of NGEU resources: per capita grants largely correspond to past economic vulnerabilities, as well as to political ones. Countries most vulnerable to another adjustment by austerity after the COVID-19 economic crisis receive most resources. Also, countries with strong anti-EU sentiments are entitled to larger NGEU grants per capita. In contrast, grants are not correlated with the severity of the health crisis. Then, we show the domestic relevance of economic and political vulnerabilities through qualitative case studies of national political debates and domestic positions on NGEU in Italy, Germany and the Netherlands. Despite its innovative traits, NGEU is a politically constrained solution to address the mess from the previous decade, and as such, it is a Janus solution: promising a fresh start, but haunted by the past.

Determinants of Own Revenues in Urban Local Bodies: Evidence from an Indian State

Our objective in this article is to understand the determinants of sustainable (own source) revenues of cities and empirically estimate it in the context of an econometric model. This article makes an attempt to understand the determinants of own revenues for ULBs in India, taking the case of a prominent state, Karnataka. We empirically examine the determinants of own source revenues, controlling for endogeneity of several variables, using valuable data for cities in Karnataka, a representative Indian state. We find that higher city per capita incomes and effective literacy rates lead to a large tax base for the city economy. Road length has a positive effect on the city’s tax base, presumably as it leads to accessing jobs easily and increased economic activity, which also gives the public more confidence and motivation to pay taxes. Per capita grants lead to higher own source revenues for the city. The policy implications are to educate the workforce in the cities better, and invest in roads, rather than viewing them as expenditure.

Capitalization of local government grants on land values: Evidence from Tokyo metropolitan area, Japan

This study investigates the capitalization effect of intergovernmental fiscal transfers from central to local governments on land prices. Using a drop in the size number of fiscal transfers following fiscal reform in the early 2000 s, this study examines the extent to which unconditional fiscal transfers to municipalities in the Tokyo metropolitan area are attributed to land prices. The result shows that the decline in the transfer has decreased the land prices in the municipalities. Furthermore, reducing one unit in the per capita grant reduced the value of housing area per capita by one or more units, even if the real discount rate was assumed to be as low as 2%. Therefore, the fiscal transfer reform more negatively affects the benefits of residing in a municipality in the area than the reduction amount in the transfer.

Capitalization of Local Government Grants on Land Values: Evidence from Tokyo Metropolitan Area, Japan

This study investigates the capitalization effect of intergovernmental fiscal transfers from central to local government into house prices. The extent to which unconditional fiscal transfers to municipalities in the Tokyo metropolitan area are attributed to land prices will be examined using the event of a drop in the size amount of fiscal transfers following the fiscal reform in the early 2000s. The result shows that the drop in the transfer has decreased the land prices in the municipalities. Furthermore, a reduction of one unit in the per capita grant decreased the value of housing area per capita by one or more units, even if the real discount rate was estimated to be as low as 2%. We can conclude that the fiscal transfer reform focused on in this paper had a more negative impact on the benefits of residing in a municipality in the area than the amount of the reduction.

DETERMINANTS OF FINANCIAL ADEQUACY: EVIDENCE FROM MALAYSIAN TAMIL SCHOOLS

Financial provision in education is one of the key factors contributing to the successful implementation of education programs in school. Financial management includes efficient management of school financial resources. However, the lack of financial resources affects students' achievement. Schools often encounter problems in providing the facilities needed by students. Schools receive financial resources in terms of per capita grants, public contributions and other government assisted funds such as scholarships and food supplements. The purpose of this study is to determine the adequacy of financial resources assigned to the National Type Tamil schools which are based on enrolment. This study was conducted in 30 National Type Government Tamil Schools and 16 National Type Government Assisted Tamil Schools in the State of Perak, Malaysia. A total of 276 respondents were involved in this survey. A logistic regression test was used to analyse factors contributing to the adequacy of financial provision for subjects, library, guidance and counselling and recurring expenditures. The findings indicate that policy makers should consider other factors such as socio-economic status and the type of schools in determining school funding allocation. Thus, the funding formula should not just be based on student enrolment.

‘Ghost citizens': Using notches to identify manipulation of population-based grants

This paper analyzes how local governments misreport population figures to obtain higher per capita grant allocations. In 1998, the allocation of a formula based grant in Spain switched from using the centrally administered census to local population registers administered by municipalities. The value of this per capita grant changes at fixed population thresholds for the entire local population. We exploit these notches to analyze the size distribution of municipalities to detect deliberate manipulation of the grant-assignment variable. This allows us to causally identify the effect of grant generosity on population over-reporting. We document an excess mass of municipalities to the right of the notch threshold and a density hole to the left of it: local registers included a proportion of ‘ghost citizens', that is, people who presented no trace of actually residing in the municipalities which benefit the most from inflating population figures to pass the relevant threshold. We document that manipulation (rather than real population responses) is the mechanism at work. The main channel behind manipulation is the incorrect treatment of foreign residents to inflate total local population.

Evaluation of an informal rule for the allocation of sports capital funding

Significant empirical research has highlighted the existence of pork barrel politics. This is where public expenditure is targeted at particular regions based on the logic of collective action: political entrepreneurs maximize their chances of re-election by searching for and implementing programs or projects characterized by ‘concentrated benefits’ for key constituents and broadly dispersed costs. Using data on capital grants to Irish sports teams for 1998–2015, this paper analyzes the extent to which an informal rule can correct this bias. The case of allocating sports capital grants is particularly interesting since academic research, media commentary, and ministerial statements all seem to confirm the existence of political bias with such allocations in Ireland. Specifically, the geographical distribution of the grants are clearly linked to the Minister for Sport: that minister’s constituent county receives significantly higher per capita grant allocation than any other county. The grants were suspended in 2009 because of a fiscal crisis arising from the recession. When the grants were restored in 2012, a new informal rule for allocations was introduced. That informal rule was introduced to reduce the extent of pork barrel politics by ensuring that no county received less than 75 % or more than 150 % of the national average of the per capita grant allocations. The present study evaluated the effectiveness of that informal rule in reducing pork barrel politics in Irish sports capital grant allocations.

The Economic and Political Impacts of Top-Down Territorial Reforms: The Case of Sub-City Governments

The main objective of this manuscript is to test two competing hypotheses from the regionalism/localism literature regarding local government size. The Leviathan hypothesis argues that fragmentation induces lower spending through more decentralised government structures which are smaller relative to the size of the local economy. This argument is in sharp opposition with the supporters of regionalism who argue that territorial centralisation can produce economies of scale and significant cost savings, reduce overlaps and promote a more efficient local government. These competing hypotheses derived from the literature are tested using data collected from all 278 local governments of continental Portugal. We measure local government size as both per capita total expenditures and per capita grant transfers to sub-city governments and territorial fragmentation as the number of sub-city governments per 1,000 individuals. Our findings indicate that higher levels of sub-city fragmentation lead to increased municipal government spending and transfers to sub-city governments, thus suggesting that the amalgamation of sub-city governments required by the Memorandum of Understanding (MoU) signed in 2011 by the Portuguese government, the International Monetary Fund, the European Union and the European Central Bank and mandated by national legislation has the potential to induce cost savings and to improve financial sustainability.

Short- and long-term evaluation of efficiency and quality. An application to Spanish municipalities

This article analyses efficiency and quality levels in Spanish local governments and their determining factors through the application of the Data Envelopment Analysis methodology. It aims to discover to what extent inefficiency arises from both quality considerations and external factors beyond the organization's control, or alternatively, how much inefficiency is due to inadequate resource management. As a component of inadequate resource management, we test the existence of political-budgetary cycles in the temporal evolution of inefficiencies. The results show that on the whole there is still a wide margin within which local government efficiency and quality levels could be increased, although it is revealed that a great deal of inefficiency is due to exogenous or noncontrollable factors. In particular, it has been found that the size of the municipality, the per capita tax revenue, the per capita grants and the amount of commercial activity are some of the factors related with local government efficiency.

Terrorism and pork-barrel spending

The horrifying, tragic events of 9/11 made Americans aware of their vulnerability to terrorist attacks and triggered the creation of the Department of Homeland Security along with a substantial increase in federal spending to both thwart terrorist attacks and to increase our ability to respond to such emergencies. Much of this large increase in spending was in the form of direct transfers to states and cities through several grant programs. Homeland Security grants may be used for protection against terrorist activities, thereby enhancing public interests, or as wealth transfers to state and local governments, enhancing the reelection efforts of incumbents, and thus, private interests. Using 2004 per capita Homeland Security grant funding to states and their cities, we find that the funding formula used for some of the grant programs, which allocates almost 40% of the funds in some grant programs through a minimum percent to each state with the rest allocated based on population, means that per capita funding is related to electoral votes per capita, i.e., to the politics of Presidential re-election. However, the funding in other grant programs is also related to some of the dangers and vulnerabilities faced by states and their cities. Some of the variation in per capita grant allocations is also explained by the amount of airport traffic in the state and the state's population density, which are variables closely linked to the state's vulnerability to attack. Per capita Homeland Security grant allocations, however, do not seem to be related to the closeness of the 2000 presidential race.

A politico-economic approach to intergovernmental lump-sum grants

This paper develops a positive approach to grant design when the central government and a lobby of local governments are the main agents. It develops the hypothesis that the regressivity or progressivity of per capita grants regarding community size is,ceteris paribus, related to the structure of the lobbying activities of local governments and is independent of hypothetical economies or diseconomies of scale in the production of local public goods. An encompassing lobby organisation using a “one mayor one vote” system of representation supports the regressivity of per capita grants while under “proportional” representation the lobby will support a design of per capita grants which is progressive towards community size. An empirical analysis of lump-sum grants in Portugal supports the politico-economic hypothesis and rejects the hypothesis that economies of scale is the main explanatory cause for the observed regressivity of per capita grants.

Equalisation and Cash Limits: A View from Down Under

In this paper, the similarities in and differences between the UK and Australian systems of allocating central government grants to local government are used to evaluate the equalisation methodologies employed in each country. In the analytical framework used, fiscal disability is measured vis-à-vis the most advantaged authority. The extent of the horizontal equalisation which occurs is shown to depend on whether this most advantaged authority receives a positive, zero, or negative per capita grant. It is concluded that in the United Kingdom, under the post 1981 unitary block-grant system, a deficiency principle or sequential approach to equalisation has been continued. In Australia, if the recommendations of the 1985 national inquiry are implemented by the local government grants commissions, the equalisation methodology employed by them will imitate the UK approach. It will thus ensure that maximum support is provided to the most disadvantaged authorities, given the constraints imposed on total funds available for equalisation.

Per Capita Funding: The Next Step to Better Schools

Changes to the state funding of education through Local Education Authorities must be gradual but are urgently required to improve standards. Dr John Marks, a member of the Hillgate Group which produced Whose Schools?, presents the argument for per capita grants to schools as a halfway‐house between local authority funding and vouchers.

Causes of Tightening Government Control of Universities

The relationship between universities and governments, particularly provincial governments, is changing. The change is taking place at different rates in the several jurisdictions, and in some places there may be counter-eddies to the main current, but in general there is a gathering thrust toward closer government control of universities. The trend manifests itself in varying ways, sometimes in the abolition of buffer mechanisms, sometimes in their transformation into control mechanisms, sometimes in contingent financing, sometimes in overt government intervention despite legalities, sometimes in subtler ways. The trend can be all too abundantly documented, but that would take too long; let me leave it as my perception of what is happening, and let us look at some of its causes. During the boom period of the later 1950's and the first half of the 60's the universities were everybody's favorite instrument for the advancement, not only of knowledge and understanding, but also of the public weal. University education seemed almost a species of magic, a universal panacea, and there was a sustained public demand not only for instant expansion of what the universities had traditionally done but also for immediate extension into many new activities. The universities were caught up in the euphoria and co-operated willingly with most of these demands, perhaps not recognizing, or if they did, only very dimly, that they would be transformed in the process. Governments, always happily responsive to taxpayers' demands for expansion, eagerly financed the boom. They were for the most part sensitive to the universities' concern that they not lose their autonomy in becoming bigger, more instrumental, and more costly. The Federal Government's growing contribution continued to be by way of per capita grants, which were entirely non-directive. Most provincial governments adopted policies of financial control only, and many established buffer commissions or separate university ministries, often both, in a deliberate effort to avoid slipping into control of the universities. Indeed^ it was in good part in'order to limit government influence that so many provinces with more than one university adopted formula financing. Needless to say, the system did not function perfectly, and there were cases of government favoritism, particularly in the allocation of facilities, and government pressure, especially in the health manpower field. But it was not until the advent in the mid-60's of student militantism, with its multiple implications and consequences, that the intent to preserve the universities' autonomy began seriously to waver. For our purposes it is

The Geography of Federal Grants-in-Aid to States

1 There have been a number of recent books and articles on federalism and on the political and economic programs of the government: W. Anderson: The Nation and States, Rivals or Partners? (Minneapolis, 1955); J. F. Due: Government Finance (Homewood, Illinois, 1959); M. Grodzins: American Political Parties and the American System, Western Polit. Quart., Vol. 13, 1960, pp. 974-988; T. R. Dye: Politics, Economics, and the Public: Policy Outcomes in the American States (Chicago, 1966); D. J. Elazar: American Federalism: A View From the States (New York, 1966); W. Heller: New Dimensions of Political Economy (Cambridge, Mass., 1966); and S. J. Mushkin and R. F. Adams: Emerging Patterns of Federalism, Natl. Tax Jour., Vol. 19, 1966, pp. 225-247. schemes.2 Most of this was for highways, agriculture, public welfare, national guard, and education programs (Table I). Grants to states have been increasing about 4 per cent per year since 1960; in fact, from 1956 to 1965 there was an increase of 198 per cent. Also the amount of aid per capita has changed markedly in recent years. In 1927 the aid was $2 per person, in 1948 only $9, and in 1965 it was $79 per capita. In FY 1965 the total per capita grants received by the states exhibited a wide range, from a high of $269 per capita in North Dakota to only $42 in New Jersey (Fig. 1). In theory the major reason for the federal government supporting state programs is to place all states on somewhat of an level with regard to certain federal objectives.3 But this equal treatment for equals concept

Intergovermental Committee for European Migration

The Council of the Intergovernmental Committee for European Migration (ICEM) held its third session in Geneva from October 17 to 22, 1956; prior to the session, the nine-member Executive Committee held a private session beginning on October 6, at which special reports from the ICEM Director, Harold H. Tittmann were considered, and recommendations on a revised budget for 1955 as well as on proposed budgets for 1956 and 1957 were formulated. The focal point of debate at the Council's session was the need to revise ICEM's system of financing. In an opening address, Director Tittmann told the Council that ICEM-assisted movements from Europe during 1955 would total approximately 118,000, instead of the 142,000 estimated at the beginning of the year. The original budget of $46.5 million had been reduced to $42.7 million, and the deficit of $2.5 million had been greatly reduced; however, a deficit for 1955 of more than $200,000 still remained, and he appealed to member countries who had not yet done so to make a contribution towards covering that deficit. In proposing a target for 1956 of 125,900 migrants, Director Tittmann stressed the fact that ICEM faced a $2.7 million deficit, urged member governments to make contributions sufficient to cover the program, and asked them to place the entire financing system of ICEM on a sounder basis. Director Tittmann further reported that it would be necessary for ICEM to reduce its grants for 1956 to voluntary agencies working in the field of migration; per capita grants would be diminished from $80 in 1955 to $35 for migrants to North America and $75 permigrant for other destinations in 1956, he stated.