| Abstract: | Intergovernmental grants are based on the interrelated choicesof: (i) the national government deciding whether to offer thegrant; (ii) the national government determining grant conditions;(iii) the subnational government deciding whether to acceptthe grant; and (iv) the subnational government determining policy,including spending levels, upon grant receipt. Empirically andtheoretically, scholars often study these decisions separately,leading to an incomplete understanding of grant-related behavior.This article develops a noncooperative game theoretic modelthat simultaneously captures all four of these decisions. Thisapproach helps to better explain puzzles surrounding intergovernmentalgrants, including the ‘flypaper effect,’ asymmetricresponses of recipient governments to grant increases and decreases,the grant-acceptance decisions of subnational governments, andtradeoffs between the size of grants and the strings that areattached. |
