Bischoff, Ivo; Bönisch, Peter; Haug, Peter; Illy, Annette - 2014 - This is a revised version of the original paper of March 2014
This paper analyses the impact of vertical grants on local public sector efficiency. First, we develop a theoretical … reduce efficiency if voters do not misinterpret the amount of vertical grants the local bureaucrats receive. If voters suffer … from fiscal illusion, i.e. overestimate the amount of grants, our model yields an ambiguous effect of grants on efficiency …
