TY - JOUR
T1 - The impact of federal and state grants on local government spending
T2 - A test of the fiscal illusion hypothesis
AU - Grossman, Philip J.
PY - 1990/1/1
Y1 - 1990/1/1
N2 - This article offers an empirical test of the fiscal illusion hypothesis. It is argued that, if fiscal illusion increases with the degree of separation in taxing and spending powers, then federal unconditional grants ought to have a greater stimulatory impact on local government spending than state unconditional grants. Data for the 136 counties and cities of Virginia were examined and evidence in support of this hypothesis is provided. Federal grants were found to be the primary source of the stimulatory impact of grants. At the minimum, federal unconditional grants have twice the stimulatory effect as state unconditional grants.
AB - This article offers an empirical test of the fiscal illusion hypothesis. It is argued that, if fiscal illusion increases with the degree of separation in taxing and spending powers, then federal unconditional grants ought to have a greater stimulatory impact on local government spending than state unconditional grants. Data for the 136 counties and cities of Virginia were examined and evidence in support of this hypothesis is provided. Federal grants were found to be the primary source of the stimulatory impact of grants. At the minimum, federal unconditional grants have twice the stimulatory effect as state unconditional grants.
UR - http://www.scopus.com/inward/record.url?scp=84964166799&partnerID=8YFLogxK
U2 - 10.1177/109114219001800304
DO - 10.1177/109114219001800304
M3 - Article
AN - SCOPUS:84964166799
SN - 1091-1421
VL - 18
SP - 313
EP - 327
JO - Public Finance Review
JF - Public Finance Review
IS - 3
ER -