Begun in 1965, federal transfers to states to assist in providing health care for poor. The federal aid is a matching grant(what is the economic rationale for that?)
Aj = mj Ej
Where Aj is aid per capita and Ej is expenditure per capita and
mj*=(1 – 0.45 (Vj2/Vnat2))
Vj= per capita income for the jth state
Vnat = per capita income for the nation
With
mj = 0.5 if mj*< 0.5
mj = mj* if 0.5< mj*< 0.83
mj = 0.83 if mj* > 0.83
What is missing in this formula?
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Devise a formula that is less blunt. What are the pros and cons of your formula.
