Despite the extensive use of formula funding models for allocating resources within the public sector, relevant theory is limited, relating primarily to territorial equalization in the context of revenue support grants paid by central government to local authorities. There, the concerns have largely been those of equity, with the objective being to compensate, partially or fully, for different needs and resources. Such equalization has frequently been argued to be a sine qua non of decentralized democratic government, as otherwise decentralization would lead inexorably to intolerable structural inequity (Musgrave, 1961; and Heald, 1993). Formula funding models were thus traditionally conceived as instruments of empowerment rather than of control, the latter being exercised through hierarchical non-financial controls such as laws and circulars rather than through the manipulation of financial incentives.Contemporary use of formula funding models is, however, becoming detached from this earlier tradition as the current focus is clearly upon securing cost reductions, an objective more closely related tothough not identical tothe pursuit of efficiency in government. Instead of upon
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.