Papers Four alternative explanations have been offered. Later research found that not all non-matching grants are perceived by the community which would therefore support the flypaper effect.A study by Fafchamps, McKenzie, Quinn and Woodruff (2014) demonstrates the flypaper effect using a randomized trial in Ghana, comparing cash transfers to in-kind transfers. The flypaper effect results when a dollar of exogenous grants-in-aid leads to significantly greater public spending than an equivalent dollar of citizen income: money sticks where it hits. A fourth explanation seems most promising: it is politics. The empirical evidence suggests none of these explanations is sufficient. The label stuck too, as has the puzzle of why intergovernmental transfers are so stimulative. 2002.
Singhal, M. 2008. Viewing governments as agents for a representative citizen voter, this empirical result is an anomaly. It is possible that matching grants have been noted as non-matching grants in statistical data or that there is some omitted variable bias present.Ever since the flypaper effect was first suggested multiple researchers have tried to establish empirical evidence for the phenomenon. Local government expenditures: A social welfare analysis. Using a discontinuous grant rule to identify the effect of grants on local taxes and spending. Henderson, J.
This approach assumes that voters are informed and rational, but conceal their preferences when it is strategically useful to do so. In Knight, B. Income and grant effects on local expenditures: The flypaper effect and other difficulties. The flypaper effect arises because aid (A) reduces the perceived tax price (µ = t (1 − θ A g)), leading to a price or substitution effect on the demand for public spending. A common explanation of the flypaper effect has a focus on the role of public officials. Knight, B. In Courant, P., E. Gramlich, and D. Rubinfeld.
As a third explanation, then, perhaps our model of citizen fiscal choice is misspecified. Matias Vernengo, Esteban Perez Caldentey, Barkley J. Rosser Jrhttp://link.springer.com/referencework/10.1057/978-1-349-95121-5 Romer, T., H. Rosenthal, and V. Munley. First, it is a data problem; exogenous aid is mismeasured. Such strategic behaviours require the use of less than efficient institutions for preference revelation, such as majority rule or representative legislatures. Researchers may have omitted important determinants of government spending likely to be correlated with citizen income or intergovernmental aid, leading to biased estimates of ΔgNeither of the Hamiltons’s biases are likely to fully explain estimated flypaper effects, however. Anomalies: The flypaper effect. Mendeley Credible estimates of aid’s effects on local spending requires good instrumental variables to predict aid, or ideally ‘natural experiments’ providing truly exogenous measures of central government assistance. Chernick, H. 1979.
1992. Reference Manager It was first argued by Other explanations offered are that it could be a data-problem or an econometric problem. In Reinikka, R., and J. Svensson. If public officials conceal this information, they may trick citizens into voting for a higher level of funding than would have otherwise been the case.
Researchers mismeasure intergovernmental aid by confusing matching grants that lower the marginal price of public services (pThe second explanation sees the anomaly as an econometric problem. Therefore, the elasticity of public service consumption to intergovernmental grants is greater than the elasticity of public service consumption to the median voter income, and this difference refers to the flypaper effect. The flypaper effect revisited: An econometric explanation. 1986. Central governments typically grant fiscal assistance to these local governments for the provision of those services. Gramlich, E. 1977. There are two reasons. Moffitt, R. 1984. … Megdal, S. 1987. First, voters may not understand the complexity of grant programmes. Specification Errors One possibility is that while it appears that money is sticking where it hits, it isn't really doing so. JabRef Hamilton, J. Both Courant et al. 1979.
Do federal grants boost school spending? Four alternative explanations have been offered.
The flypaper effect and other anomalies.
The flypaper effect and the deadweight loss from taxation. The flypaper effect results when a dollar of exogenous grants-in-aid leads to significantly greater public spending than an equivalent dollar of citizen income: Money sticks where it hits. Local capture: Evidence from a central government transfer in Uganda. Fisher, R. 1982. In Hamilton, B. This service is more advanced with JavaScript availableThe flypaper effect results when a dollar of exogenous grants-in-aid leads to significantly greater public spending than an equivalent dollar of citizen income: money sticks where it hits.
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