The 'flypaper effect' is not an anomaly

Arbeitspapier

An in-kind subsidy is equivalent, both theoretically and empirically, to an increase of income for an individual consumer. But the equivalence does not empirically carry over to in-kind grants by a central government to a local one: this has been seen as an anomaly and dubbed the â??flypaper effect.â?? We argue that the â??anomalyâ?? label is incorrect: the nonequivalence of increases in grants and community income is predicted, almost everywhere, by models that understand collective decision as the outcome of electoral competition among political parties. In addition, we compute politico-economic equilibria for a model with two independent tax parameters and obtain numerical values that agree with the existing empirical literature.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 00-4

Classification and Topics

• Classification: Wirtschaft ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior ; Public Goods ; State and Local Taxation, Subsidies, and Revenue ; Intergovernmental Relations; Federalism; Secession
• Subject: Flypaper-Effekt ; Finanzausgleich ; Median Voter ; Theorie ; Sachtransfer

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Roemer, John E. ; Silvestre, Joaquim
• Event: Veröffentlichung
• (who): University of California, Department of Economics
• (where): Davis, CA
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/79430
• Last update: 10.03.2025, 11:44 AM CET