Capital-Intensive Projects Induce More Effort than Labor-Intensive Projects

12 Pages Posted: 6 Jan 2009

See all articles by Amihai Glazer

Amihai Glazer

University of California, Irvine - Department of Economics

Stef Proost

KU Leuven - Department of Economics

Date Written: December 2008

Abstract

Central governments often subsidize capital spending by local governments, instead of subsidizing operating expenses or labor-intensive projects. This paper offers one explanation, focusing on the incentive effects for local officials. A local official can more easily shift the cost of optimizing a project to his successor on a labor-intensive project than on a capital-intensive project.

Keywords: federalism, capital subsidies, transit subsidies

JEL Classification: H77, H71, L92

Suggested Citation

Glazer, Amihai and Proost, Stef V., Capital-Intensive Projects Induce More Effort than Labor-Intensive Projects (December 2008). Available at SSRN: https://ssrn.com/abstract=1323301 or http://dx.doi.org/10.2139/ssrn.1323301

Amihai Glazer

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States
949-854-6563 (Phone)
949-824-2182 (Fax)

Stef V. Proost (Contact Author)

KU Leuven - Department of Economics ( email )

Leuven, B-3000
Belgium
016 32 66 35 (Phone)
016 32 67 96 (Fax)

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