Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2008:17: Intergovernmental grants and bureaucratic power

Matz Dahlberg (), Heléne Lundqvist () and Eva Mörk ()
Additional contact information
Matz Dahlberg: IFAU - Institute for Labour Market Policy Evaluation, Postal: Box 513, SE-751 20 Uppsala, Sweden
Heléne Lundqvist: Uppsala University, Department of Economics, Postal: Box 513, SE-751 20 Uppsala, Sweden
Eva Mörk: Institute for Labour Market Policy Evaluation, Postal: Box 513, SE-751 20 Uppsala, Sweden

Abstract: In their role as agenda setters and implementers of political decisions, bureaucrats potentially have the power to influence decisions in their own favor. It is however difficult to empirically test whether bureaucrats actually are involved in such actions. In this paper we suggest and apply a new way of testing the hypothesis that bureaucrats can and do in fact affect policy to their own benefit. Making use of a discontinuity in the Swedish grant system, we estimate causal effects of intergovernmental grants on different types of personnel employed by the local governments. On the margin, we find a large, positive effect of grants on the number of bureaucrats in the central administration, but no effects on the number of personnel in other important sectors run by the local government (child care, schools and elderly care). These results support the view that bureaucrats are able to, and do indeed, affect the allocation of grants within municipalities to support own goals.

Keywords: Fiscal federalism; grants; bureaucrats; rent seeking; discontinuity analysis

JEL-codes: C33; H11; H70; H83; J45

33 pages, August 21, 2008

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