Donor-Determined Intergovernmental Grants Structure

Abstract

The lack of simple language to describe the structure of intergovernmental grant programs and a failure to recognize that such programs are chosen by legislators whose preferences differ from those of recipients has led to an inability to develop a theory of why intergovernmental grants exist and why grant programs take the forms that they do. By reducing the complexities of grant programs to a simple structure of rates, bases, and purposes, this article is able to provide a conceptual framework for viewing individual grant programs as components of a comprehensive intergovernmental grants structure chosen through a legislative process in which individual legislators have preferences that are distinct from those of their recipients. Administrative costs play an important role in keeping the resulting grants structure simple, and the existence of categorical grants is shown to depend on the existence of spillover effects, fiscal illusion, or political asymmetry.