NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Special Interest Groups and the Allocation of Public Funds

Monica Singhal

NBER Working Paper No. 12037
Issued in February 2006
NBER Program(s):   PE

A long-standing puzzle in the fiscal federalism literature is the empirical non-equivalence in government spending from grants and other income. I propose a fully rational model in which violations of fungibility arise from dynamic interactions between politicians and interest groups with the ability to raise funds for local government. The predictions of the model are tested by exploiting unique features of windfalls received by states under a settlement with the tobacco industry. Although windfalls are unrestricted, the median state increased spending on tobacco control programs from zero to $2.30 per capita upon receipt of funds. The marginal propensity to spend on such programs is 0.20 from settlement revenue and zero from overall income. States which were not involved in the settlement lawsuits spend less. The findings are consistent with the predictions of the model when political partisanship is introduced: Republican governors spend less and factors which should lead to political convergence increase spending for Republicans and decrease spending for Democrats. These results cannot be explained by existing models in the literature.

download in pdf format
   (305 K)

email paper

This paper is available as PDF (305 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w12037

Published: Singhal, Monica. "Special Interest Groups and the Allocation of Public Funds." Journal of Public Economics 92, 3-4(April 2008): 548-564.

Users who downloaded this paper also downloaded these:
Spiller and Liao w12209 Buy, Lobby or Sue: Interest Groups' Participation in Policy Making - A Selective Survey
Inman w14579 The Flypaper Effect
Alston, Libecap, and Mueller w15865 Interest Groups, Information Manipulation in the Media, and Public Policy: The Case of the Landless Peasants Movement in Brazil
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us