Location of Repository

Subnational fiscal behavior under the expectation of federal bailouts

By Ernesto Crivelli


This paper analyzes how subnational governments allocate own resources between current spending and infrastructure investment and decide on borrowing under the expectation of federal bailouts. It is assumed that states' borrowing possibilities increase with the expectation of such bailouts because the financial system is willing to fund a higher amount of public investment projects. As a result, state governments engage in an opportunistic behavior: they allocate a higher (lower) than optimal amount of own resources to current spending (infrastructure investment) and over-borrow.fiscal federalism, soft budget constraints, local public investment, subnational borrowing,

DOI identifier: 10.1080/17487870.2011.543760
OAI identifier:
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://www.tandfonline.com/doi... (external link)
  • Suggested articles

    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.