Conditional Block Grant Suppose tha

Conditional Block Grant
Suppose that Massachusetts likes the fact that it has
made Lexington better off with a block grant than with a matching grant, but it
doesn’t like the fact that education spending hasn’t gone up as much. One way
the state could try to remedy this is through a conditional block grant, a
fixed amount of money distributed to the town with a mandate that the money
be spent only on education. In this case, the state could provide Lexington with
a $375,000 block grant and mandate that it spend the entire grant on education.
The effect of this conditional block grant is illustrated in Figure 10-5. Lexington
can now spend up to $375,000 (the grant amount) on education while
continuing to spend its original $1 million budget on private goods. Thus, the
first segment on the budget constraint is now AF. Once Lexington spends
beyond $375,000 on education, however, it faces the same trade -off between
spending on education and spending on private goods that it did when it got
the unconditional grant: the condition imposed on this grant doesn’t matter if the town is already spending more than $375,000 on education. The new
budget constraint is therefore AFE. Beyond the $375,000 point on the horizontal
axis, this new budget constraint is the same as the budget constraint
from the unconditional block grant.
As is clear from Figure 10-5, adding this condition has no effect on Lexington’s
behavior: the town still chooses to spend the same $575,000 on education that it
spent with the unconditional block grant (at point Z). Because Lexington was
already spending more than $375,000 on education, this grant is effectively not
conditional for the town—it has the same effect as if the state had simply given it
$375,000 to spend on anything. The town has therefore undone the mandate to
spend the money on education by reallocating existing spending to meet the mandate.
This is an example of the type of crowd-out that we discussed in Chapter 7.
The state government gave the town $375,000 to spend on education, but the
town spent only $75,000 net of that money on education; it spent the remaining
$300,000 on private goods. Thus, 80% ($300,000/$375,000) of the state spending
was crowded out by the town’s reaction. Despite a large state grant, local education
spending rose by only a small amount.
The effect of a conditional block grant will differ from that of an unconditional
block grant only if the town receiving the grant would have spent less
than the grant amount without the condition being imposed. That is, adding
the condition to the block grant would affect Lexington’s behavior only if it
would have chosen to spend less than $375,000 on education with the unconditional
block grant. In that case, making the block grant conditional would
increase Lexington’s educational spending by more than just $75,000. If towns
such as Lexington would spend more than $375,000 on education regardless
of this restriction, then there is no effect of imposing the restriction.

Hasil (Bahasa Indonesia) 1:

Bersyarat Block Grant Anggaplah bahwa Massachusetts menyukai fakta bahwa ia memilikimembuat Lexington lebih baik dengan block grant daripada dengan pencocokan hibah, tetapitidak menyukai kenyataan bahwa pendidikan pengeluaran belum naik sebanyak. Salah satu caranegara bisa mencoba untuk memperbaiki hal ini adalah melalui bersyarat block granttetap jumlah uang yang didistribusikan ke kota dengan mandat yang uangdihabiskan hanya pada pendidikan. Dalam kasus ini, negara dapat memberikan Lexington denganhibah $375.000 dan mandat bahwa itu menghabiskan seluruh dana pendidikan.Efek ini hibah bersyarat diilustrasikan pada gambar 10-5. Lexingtonsekarang dapat menghabiskan hingga $375.000 (jumlah hibah) pada pendidikan sambilterus menghabiskan anggaran $1 juta asli pada barang-barang pribadi. Dengan demikian,segmen pertama pada kendala anggaran yang kini AF. Setelah menghabiskan Lexingtonmelampaui $375.000 pendidikan, namun, wajah yang sama perdagangan - off antaraBelanja untuk pendidikan dan pengeluaran barang pribadi yang itu ketika ia mendapathibah tanpa syarat: kondisi yang dikenakan pada hibah ini tidak masalah jika kota sudah menghabiskan lebih dari $375.000 pendidikan. Baruanggaran kendala adalah AFE. Melampaui titik $375.000 horizontalsumbu, kendala anggaran yang baru ini adalah sama dengan kendala anggaran yangdari block grant tanpa syarat.Sebagaimana jelas dari gambar 10-5, menambahkan kondisi ini tidak berpengaruh pada Lexington'sbehavior: the town still chooses to spend the same $575,000 on education that itspent with the unconditional block grant (at point Z). Because Lexington wasalready spending more than $375,000 on education, this grant is effectively notconditional for the town—it has the same effect as if the state had simply given it$375,000 to spend on anything. The town has therefore undone the mandate tospend the money on education by reallocating existing spending to meet the mandate.This is an example of the type of crowd-out that we discussed in Chapter 7.The state government gave the town $375,000 to spend on education, but thetown spent only $75,000 net of that money on education; it spent the remaining$300,000 on private goods. Thus, 80% ($300,000/$375,000) of the state spendingwas crowded out by the town’s reaction. Despite a large state grant, local educationspending rose by only a small amount.The effect of a conditional block grant will differ from that of an unconditionalblock grant only if the town receiving the grant would have spent lessthan the grant amount without the condition being imposed. That is, addingthe condition to the block grant would affect Lexington’s behavior only if itwould have chosen to spend less than $375,000 on education with the unconditionalblock grant. In that case, making the block grant conditional wouldincrease Lexington’s educational spending by more than just $75,000. If townssuch as Lexington would spend more than $375,000 on education regardlessof this restriction, then there is no effect of imposing the restriction.