<p>This paper investigates the effects of intergovernmental grants on municipal labour demand in Finland and Sweden during the period 1985-2002. Both these countries have large public sectors in which local authorities play a significant role. In addition, both countries went through major grant reforms in 1993, reforms that meant that most targeted grants were replaced by general, non-earmarked grants. This allows for studying the effects of the different types of grants separately. The results suggest that targeted grants affect Finnish municipal employment more than general ones do, at least when looking at levels. When looking at elasticities, however, the opposite is indicated. In Sweden intergovernmental grants appear to have no effect at all on municipal employment before the reform, but after the estimated elasticity is 0.10. This is somewhat lower than in Finland, where the estimated elasticities are 0.13 and 0.14 before and after the reform, respectively. The results also lend additional support to the so called “flypaper effect”, an empirical phenomenon that has been observed in numerous previous studies.</p>

This paper investigates the effects of intergovernmental grants on municipal labour demand in Finland and Sweden during the period 1985-2002. Both these countries have large public sectors in which local authorities play a significant role. In addition, both countries went through major grant reforms in 1993, reforms that meant that most targeted grants were replaced by general, non-earmarked grants. This allows for studying the effects of the different types of grants separately. The results suggest that targeted grants affect Finnish municipal employment more than general ones do, at least when looking at levels. When looking at elasticities, however, the opposite is indicated. In Sweden intergovernmental grants appear to have no effect at all on municipal employment before the reform, but after the estimated elasticity is 0.10. This is somewhat lower than in Finland, where the estimated elasticities are 0.13 and 0.14 before and after the reform, respectively. The results also lend additional support to the so called “flypaper effect”, an empirical phenomenon that has been observed in numerous previous studies.

This paper examines the response of Swedish local governments to a targeted intergovernmental stimulus grant aimed at increasing staffing levels in elderly care. The focus is on two key outcomes: municipal elderly care personnel costs relative to total municipal costs and the number of full-time employees in elderly care per elderly user. An OLS regression based on panel data between 2011 and 2018 initially estimates the grant’s spending effects. An instrumental variable (IV) model is then employed to address potential endogeneity, utilizing an update in the grant allocation formula. Both the OLS and IV estimates suggest that the stimulus grant has no discernible effect on the ratio of elderly care personnel costs to total municipal spending. Furthermore, the IV results show insignificant short-run effects on full-time employment in elderly care. However, significant increases are observed three years after the allocation formula update. The overall effects confirm standard economic grant theory predicting how non-matching targeted grants only contribute to an income effect.

This dissertation focuses on how distributive politics influences the geographic allocation of federal grants to state and local governments. A secondary focus is the role of social trust in the growth of government. In the first essay, I test the degree to which the earmark ban of 2011 prevented legislators from directing federal competitive grants to their home congressional districts and whether earmarking distorted equality in the distribution of federal grants across demographic groups. I find that earmarking skewed the distribution of federal grants toward wealthy congressional districts and away from poor congressional districts. This is a groundbreaking finding, considering that no literature has addressed the impact of earmarking on economic inequality. In the second essay, I estimate the returns to lobbying for local governments in terms of federal earmarked grants, and I find that local governments in counties with higher levels of income per capita were more likely to engage in lobbying. I also find evidence of a causal link between lobbying and federal earmarks to local governments. Given that local governments in wealthy areas tend to have larger tax bases, which allows them to more easily fund public infrastructure projects, my findings imply that lobbying and earmarking hampered the ability of federal grant programs to promote equality in the distribution of federal funds. The third essay utilizes time series econometrics to examine the relationship between government regulation, spending, interest group activity, and social trust in government.

The thesis consists of an introductory part and three self-contained papers. Paper [I] studies the determinants of the differences in expenditure on services for functionally impaired individuals among municipalities in Sweden. A spatial autoregressive model is used in order to test whether the decisions on the expenditure level in a neighboring municipality affect the municipality’s own expenditure. The results show of spatial interaction among neighbors, possible due to mimicking. However, when controlling for differences among counties there is no evidence of spatial interaction. Therefore, the positive interaction first found can be interpreted either as a result of differences in the way county councils diagnose individuals or due to interaction among the neighbors in the same county. Paper [II] takes advantage of a new intergovernmental grant in two ways. First, the grant is used to study the effect on municipal spending related to the grant. Second, the grant is used to test a hypothesis of spatial interaction among municipalities due to mimicking behavior. The data used pertains to the periods before and after the introduction of the grant. A fixed-effects spatial lag model is used to study the spatial interactions among municipalities. The results show that before the grant, municipalities interact with their neighbors when setting the expenditure level, while there is no evidence of interaction in the second period. This would support the hypothesis that the grants provide information to the municipalities and the need for mimicking diminishes with the grant. Paper [III] examines whether local public expenditures on services to functionally impaired individuals crowd out other local public expenditures in Sweden. The hypothesis is tested on five different spending areas using a two-stage least squares (2SLS) fixed-effects model. While the results give no support for crowding out in the areas of social assistance, culture &amp; leisure, and childcare &amp; preschool, a negative relationship on spending for elderly &amp; disabled care and on spending for education is found, suggesting that crowding out indeed occurs within the municipal sector. The negative relationships are significant both in a statistical and an economic sense.

Submitted by Isabella Souto Pera Simões (isasps@gmail.com) on 2014-01-20T00:02:45Z No. of bitstreams: 1 Dissertação Isabella - Apropriação das transferências pelas burocracia_vbiblioteca.pdf: 553541 bytes, checksum: 1856ebed70c40ef9f62836e22fe0072d (MD5) / Approved for entry into archive by Vera Lúcia Mourão (vera.mourao@fgv.br) on 2014-01-20T12:22:10Z (GMT) No. of bitstreams: 1 Dissertação Isabella - Apropriação das transferências pelas burocracia_vbiblioteca.pdf: 553541 bytes, checksum: 1856ebed70c40ef9f62836e22fe0072d (MD5) / Made available in DSpace on 2014-01-20T13:25:18Z (GMT). No. of bitstreams: 1 Dissertação Isabella - Apropriação das transferências pelas burocracia_vbiblioteca.pdf: 553541 bytes, checksum: 1856ebed70c40ef9f62836e22fe0072d (MD5) Previous issue date: 2013-12-19 / Despite what would be expected by a simple theoretical prediction, several empiric studies have verified that an increase of the grants-in-aid leads to greater public spending in comparison to an equivalent raise in the citizen’s income. One of the hypotheses for this phenomenon, known as the flypaper effect, is that the bureaucracy appropriates of grants through wages, which is consistent with the assumption raised by the literature that bureaucrats would be interested in maximizing their own budget and would take advantage of the information and power asymmetries compared to the electorate. This paper aims to investigate whether this assumption is demonstrated empirically for Brazilian municipalities, verifying the relationship between transfers and the wage differential between the public and private spheres. Therefore, we use municipalities’ data panel from 2002 to 2011 and an instrumental variables model. The wage differential is obtained through the Oaxaca Decomposition, which isolates the effect of individual characteristics in wages from the resource appropriation result. The results show that there are evidences of appropriation, not only when public and private sectors are compared as a whole, but also when subsectors are considered. / Ao contrário do que seria esperado em uma previsão teórica simples, diversos trabalhos empíricos têm verificado que um aumento das transferências intergovernamentais gera um gasto público maior do que uma elevação equivalente na renda dos indivíduos. Uma das hipóteses para este fenômeno, conhecido com o flypaper effect, é de que a burocracia se apropria das transferências por meio de salários, o que é condizente com o pressuposto de que os burocratas estariam interessados em maximizar seu próprio orçamento, e se aproveitariam da assimetria de informação e poder em relação ao eleitorado. Este trabalho tem o objetivo de investigar se tal pressuposto se comprova empiricamente para os municípios brasileiros, verificando a relação entre as transferências incondicionais e o diferencial de salários entre as esferas pública e privada. Para tanto, utilizamos um painel de municípios que cobre o período de 2002 a 2011 e um modelo econométrico de variável instrumental. Para medir o diferencial de salário, foi usada a Decomposição de Oaxaca, que separa o efeito das características individuais daquele que seria gerado pela apropriação. Os resultados apontam para a ocorrência de apropriação, considerando não só o setor público e privado formal como um todo, mas também seus subsetores.

Modellen för röstmaximerande politiska partier i ett proportionerligt valsystem presenterad av Lindbeck och Weibull (1987) respektive Dixit och Londregan (1996) används för att testa svenska regeringens taktiska användning av de allmänna statsbidragen till kommunerna under åren 2007–2010. Resultaten tyder på att statsbidragen använts taktiskt vilket korroborerar teorin. Liknande analys för åren 2015–2018 kunde inte replikera resultaten. Svensk valundersökning används för att identifiera väljarnas ideologiska preferens för regeringen under tiden för riksdagsvalet 2006 varefter mätmodellen presenterad av Johansson (2003) och Dahlberg och Johansson (2002) används för att skatta poängen mot den latenta faktorn "ideologisk bias". Dessa poäng delas upp efter valkrets och används för att skatta den ideologiska biasens täthetsfördelning i respektive valkrets. Valresultatet används för att identifiera indifferenspunkterna där väljarna i respektive valkrets är indifferenta mellan båda politiska blocken. Täthetsfunktionerna utvärderas vid dessa punkter varefter betydelsen av tätheterna som determinant för mängden allmänna statsbidrag en kommun erhåller testas genom linjär regression. / A version of the model for voter share maximizing political parties in a proportional electoral system developed by Lindbeck and Weibull (1987) and Dixit and Londregan (1996) respectively is presented. This model is used to test if there is evidence for the tactical use of intergovernmental grants from the central incumbent government to the local governments at the municipal level during the first term of office 2007-2010 of the conservative Reinfeldt government in Sweden. The results show that such tactical use did occur, and which corroborates the theoretical framework for competing parties. Similar results were obtained for the periods 2011-2014 (conservative government) and 2015-2018 (socialist government). Data from the Swedish election studies are used to identify the voter’s ideological preferences for the incumbent central government during the time of the 2006 general election to the Swedish parliament. The theory behind the model presented by Johansson (2003) and Dahlberg and Johansson (2002) respectively was the guideline to estimate the factor scores against the latent factor “ideological bias”. The Gaussian kernel density function is used to estimate the ideological bias in each constituency: The actual election results are used to approximate the indifference cutpoint where the voters are indifferent between both political alternatives. The probability distribution functions were evaluated at these cutpoints after which the importance of these densities for the amount of intergovernmental grants a municipality receives is tested using linear regression.

Esta tesis investiga la economía política de las transferencias intergubernamentales. Se centra en los factores políticos que determinan la asignación de fondos bajo control de gobiernos centrales a las diversas regiones. El primer capítulo, contribuye a este asunto a través de un nuevo análisis de los datos del panel y una medida comprensiva de necesidades de gastos para el caso de Rusia. El segundo capítulo, desarrolla nuevas herramientas metodológicas para analizar sistemas políticos del multi-partido. Estas herramientas permiten medir a votantes cambiantes en dos dimensiones ideológicas usando datos individuales de los estudios electorales. En el tercer capítulo se utilizan las medidas de votantes cambiantes para probar teorías de las políticas distributivas para el caso de España. Este capítulo demuestra que las variables políticas son significativas en la asignación de las subvenciones del estado, y la magnitud del efecto es comparable a la de variables económicas. / This thesis investigates the political economy view of intergovernmental grants. It centers on the political factors that determine allocation of funds under the control of central governments to different regions. The first chapter contributes to this topic by a novel analysis of panel data and a comprehensive measure of expenditure "needs" for the case of Russia. The second chapter develops new methodological tools for analyzing multi-party political systems. These tools allow to measure swing voters on two "ideological" dimensions using individual survey data. In the third chapter the measures of swing voters are used to test theories of distributive politics for the case of Spain. This chapter shows that political variables are significant in the allocation of state subventions, and the magnitude of the effect is comparable to that of economic variables.