Gregor, Martin; Roháč, Dalibor - In: Czech Economic Review 3 (2009) 1, pp. 093-113
We extend a model of wasteful state aid in Dewatripont and Seabright (2006, Journal of the European Economic Association 4, 513–522) by a supranational controlling authority. The model combines moral hazard and adverse selection to show that politicians fund wasteful projects to signal their...