Municipal Grant Programmes: Political Entanglements and Information Deficits

In financing investments, municipalities rely heavily on infrastructure grants. These funds are distributed through numerous programmes, with the states playing a significant role. Empirical research suggests that political affiliations influence the allocation of these funds. On one hand, political actors on the donor side tend to favour connected municipalities. On the other hand, information asymmetries on the recipient side can explain why certain municipalities receive less funding. Consequently, funds may not end up where they generate the greatest impact. The article synthesises available evidence and derives implications for the design of grant programmes.