14th journées Louis-André Gérard-Varet

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Is decentralized health care provision amenable to the distribution of an unconditional block grant?
Mark A.C. Kattenberg, Wouter Vermeulen

Last modified: 2015-05-14


Decentralization of health care to local governments may induce undesired geographical variation in utilization and underprovision. While economic theory suggests matching grants as a remedy to these potential ills, decentralized health care provision is often funded with block grants in practice. To what extent can the central government steer local health care expenditure through the distribution of an unconditional block grant? We study the decentralization of home care in the Netherlands and exploit the gradual introduction of an equalizing grant to identify the causal effect of grants on expenditure and utilization. The central government must spend two euros in order to raise local spending with one euro. Adjustments occur through the number of hours as well as the quality of home care.


decentralization; intergovernmental grants; fiscal federalism