| Abstract: |
Recent empirical literature has shown that the determination of
intergovernmental grants is highly influenced by the political bargaining
power of the recipient states. In these models federal politicians are assumed
to buy the support of state voters, state politicians and state interest
groups by providing grants. In this paper we provide evidence that the fiscal
referen-dum reduces the reliance of states on matching grants received from
the central government and thus the possibility of state interest groups and
state bureaucrats to obtain more grants. If referendums are available, voters
serve as a hard budget constraint. |