INTERGOVERNMENTAL GRANTS PUBLIC ECONOMICS

TYPES OF INTERGOVERNMENTAL GRANTS: Matching Grants Open-Ended Closed-Ended Conditional Non-

Matching Grants Unconditonal

MATCHING GRANTS: In the case of

a matching grant the central government agrees to match a certain proportion of the expenditures of the local authority. The recipient
must match the funds to some degree. Example: Government may pay X percent of the total cost of providing the service at the local
level. Matching grants may be either open or closed

• Open ended Grants: There is no upper limit of the grant beyond which the central government will go.
• Closed ended Grants: Grants with a closed limit are called Closed ended Grants

NON MATCHING GRANTS Grants that offer a given amount of funds without local matching. Non-matching grants may be either
conditional (selective) or unconditional (general). • Conditional Non-matching Grants offer a given amount of funds without local
matching, provided they are spent for a particular purpose. conditionality ensures that the recipient government's spending on the
specified category will be at least equal to the amount of grant monies. • If the recipient is already spending an amount equal to grant
funds, some or all of the grant funds may be diverted to other uses. In practice it is possible that the lumpiness of investments in areas
such as infrastructure may result in increases in expenditures exceeding grants. In Unconditional Non-matching Grant, no constraints
are put on how it is spent and no minimum expenditure in any area is expected. Since the grant can be spent on any combination of
public goods or services or to provide tax relief to residents, general non- matching assistance does not modify relative prices Least
stimulating of local spending.
A: INITIAL CASE PRIOR TO ANY GRANT ASSISTANCE
B: UNCONDITIONAL NON-MATCHING GRANT
C: CONDITIONAL NON-MATCHING GRANT
D: MATCHING OPEN ENDED GRANTS
E: MATCHING CLOSED ENDED GRANTS
F: COMPARISON BETWEEN UNCONDITIONAL NON-MATCHING GRANT & MATCHING OPEN ENDED
GRANTS