The New Palgrave Dictionary of Economics Online

Intergovernmental grants are payments from one level of government to another, such as from the federal government to a state government, or from a city to a school district. Theoretically, such grants allow more local choice in public goods provision than purely centralized provision would, while still enabling some redistribution across local jurisdictions. Empirical research on these grants has focused on the extent to which these grants ultimately affect spending by receiving jurisdictions, both on the intended programme area and overall, and on other unintended consequences of the grants.