Allocating the Education Block Grant to Meet Local Demands

Following a political economy approach, this paper analyzes the outcomes of three different grant distribution systems. Analytically identifying the outcomes generated by each system, it compares and contrasts the quantitative results across the systems. The main finding is that matching and contesting systems have a similar large impact on total resources allocated to education, as well as how those resources are distributed across districts. It also shows that a contesting-for-grant system is chosen by majority vote in the National Assembly only if the central government aggressively encourages its subnational governments to expand their education spending by increasing the portion of education block grants to be distributed according to an incentive scheme.