English
 
User Manual Privacy Policy Disclaimer Contact us
  Advanced SearchBrowse

Item

ITEM ACTIONSEXPORT

Released

Paper

Size, Spillovers and Soft Budget Constraints

MPS-Authors
/persons/resource/persons183101

Crivelli,  Ernesto
Max Planck Institute for Research on Collective Goods, Max Planck Society;

Fulltext (public)
There are no public fulltexts available
Supplementary Material (public)
There is no public supplementary material available
Citation

Crivelli, E., & Staal, K. (2008). Size, Spillovers and Soft Budget Constraints.


Cite as: http://hdl.handle.net/11858/00-001M-0000-0028-6D17-0
Abstract
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. We also discuss the effect economies of scale in local public goods provision has on the bailout policies and argue that these policies can be subgame perfect equilibrium strategies.