Central Aid and Local Policy

Abstract

This paper supplements previous research on central aid as a determinant of local expenditure by considering the relative effect of aid on levels of per capita expenditures of poor and well-to-do communities. Systemic differences in normative and structural features of central aid are useful in considering the effect of aid on local communities' expenditures. The use of different measures from those commonly found in the literature is helpful in considering similar theoretical propositions on the role of central aid in different political systems. Utilizing the Lorenz curve and its Gini coefficient, and the coefficient of variation, the redistributive effect of aid is examined. Central government aid is important to local expenditure capacity, and, when compared with the United States, Israel shows greater centralization in local-central financial relations. Redistribution is not fully apparent after aid payments are made to communities. This stems from systemic structuralfeatures which allow individual bargaining for aid resources, and gives the well-to-do communities a visible advantage. Central aid does not close the gap between poor and well-to-do communities. Rather, proportional differences remain, while each community improves its per capita expenditures.