IDEAS home Printed from https://ideas.repec.org/a/emx/esteco/v28y2013i1p165-186.html
   My bibliography  Save this article

The flypaper effect in Mexican local government

Author

Listed:
  • Laura Sour

    (Universidad Anáhuac México Norte)

Abstract

In this paper we present evidence of the flypaper effect on unconditional transfers in the Mexican municipalities during the 1990 to 2007 period. Using panel data, we also confirm an asymmetric effect. That is, authorities increase expenditures by a greater amount in response to an increase in transfers than the amount by which they reduce expenditures in response to a decrease in transfers (Gamkhar, 2000). These results are particularly relevant in light of the discussion that has developed in recent years about the need for a reform on the fiscal federalism in the country.

Suggested Citation

  • Laura Sour, 2013. "The flypaper effect in Mexican local government," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 28(1), pages 165-186.
    • Handle: RePEc:emx:esteco:v:28:y:2013:i:1:p:165-186
    as

    Download full text from publisher

    File URL: https://estudioseconomicos.colmex.mx/index.php/economicos/article/view/82/84
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bruno Heyndels, 2001. "Asymmetries in the flypaper effect: empirical evidence for the Flemish municipalities," Applied Economics, Taylor & Francis Journals, vol. 33(10), pages 1329-1334.
    2. Steven C. Deller & Craig S. Maher, 2006. "A Model of Asymmetries in the Flypaper Effect," Publius: The Journal of Federalism, CSF Associates Inc., vol. 36(2), pages 213-229.
    3. Hamilton, Bruce W., 1983. "The flypaper effect and other anomalies," Journal of Public Economics, Elsevier, vol. 22(3), pages 347-361, December.
    4. Melo, Ligia, 2002. "The Flypaper Effect under Different Institutional Contexts: The Colombian Case," Public Choice, Springer, vol. 111(3-4), pages 317-345, June.
    5. Ajit Karnik & Mala Lalvani, 2005. "Urban Local Governments and the Flypaper Effect: Evidence from Maharashtra, India," Publius: The Journal of Federalism, CSF Associates Inc., vol. 35(2), pages 273-295, Spring.
    6. Deller, Steven C. & Walzer, Norman, 1995. "Structural Shifts in the Treatment of Intergovernmental Aid: The Case of Rural Roads," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 27(2), pages 522-535, December.
    7. Levaggi, Rosella & Zanola, Roberto, 2003. "Flypaper Effect and Sluggishness: Evidence from Regional Health Expenditure in Italy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(5), pages 535-547, September.
    8. Stine, William F., 1994. "Is Local Government Revenue Response to Federal Aid Symmetrical? Evidence from Pennsylvania County Governments in a Era of Retrenchment," National Tax Journal, National Tax Association, vol. 47(4), pages 799-816, December.
    9. Jorge Martinez-Vazquez & LF Jameson Boex, 1997. "Fiscal Capacity: An Overview of Concepts and Measurements Issues and Their Applicability in the Russian Federation," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper9703, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    10. Becker, Elizabeth, 1996. "The Illusion of Fiscal Illusion: Unsticking the Flypaper Effect," Public Choice, Springer, vol. 86(1-2), pages 85-102, January.
    11. Bradford, David F & Oates, Wallace E, 1971. "Towards a Predictive Theory of Intergovernmental Grants," American Economic Review, American Economic Association, vol. 61(2), pages 440-448, May.
    12. Stine, William F., 1994. "Is Local Government Revenue Response to Federal Aid Symmetrical? Evidence From Pennsylvania County Governments in a Era of Retrenchment," National Tax Journal, National Tax Association;National Tax Journal, vol. 47(4), pages 799-816, December.
    13. James R. Hines & Richard H. Thaler, 1995. "The Flypaper Effect," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 217-226, Fall.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cristian F. Sepúlveda, 2017. "Flypaper effect, intergovernmental transfers, income and substitution effects, marginal cost of public funds," Hacienda Pública Española / Review of Public Economics, IEF, vol. 222(3), pages 91-108, September.
    2. Pedro Isidoro González Ramírez & Edgar Gomez Galarza, 2020. "Federalismo fiscal y las asignaciones de transferencias en San Luis Potosí, México," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 15(3), pages 395-413, Julio - S.
    3. Luigi Marattin & Tommaso Nannicini & Francesco Porcelli, 2022. "Revenue vs expenditure based fiscal consolidation: the pass-through from federal cuts to local taxes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(4), pages 834-872, August.
    4. Lela Nurlaela & Heri Ispriyadi & Dhika Habibi Zakaira, 2022. "The flypaper effect phenomenon of intergovernmental transfers during the Covid-19:Evidence from Indonesia," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 40(2), pages 353-373.
    5. Eliseo Díaz González & Adriana del Rocío Montelongo Jaime, 2017. "Transferencias federales a los estados en México. Valoración del efecto del papel matamoscas en el contexto de una demanda extraordinaria de recursos federales," Ensayos de Economía 16803, Universidad Nacional de Colombia Sede Medellín.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Leonel Muinelo-Gallo, 2021. "Testing regional intergovernmental transfers effects in Uruguay," Sobre México. Revista de Economía, Sobre México. Temas en economía, vol. 2(4), pages 6-38.
    2. Steven C. Deller & Craig S. Maher, 2006. "A Model of Asymmetries in the Flypaper Effect," Publius: The Journal of Federalism, CSF Associates Inc., vol. 36(2), pages 213-229.
    3. Manuel E. Lago & Santiago Lago-Peñas & Jorge Martinez-Vazquez, 2022. "On the effects of intergovernmental grants: a survey," Working Papers. Collection A: Public economics, governance and decentralization 2204, Universidade de Vigo, GEN - Governance and Economics research Network.
    4. Phuong Nguyen-Hoang & Yilin Hou, 2014. "Local Fiscal Responses to Procyclical Changes in State Aid," Publius: The Journal of Federalism, CSF Associates Inc., vol. 44(4), pages 587-608.
    5. José Marcelo Torres Ortega & Jorge Mario Ortega De la Rosa, 2022. "Flypaper Effect: The Colombian Municipalities Case for 2000-2017," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 97, pages 79-111, July-Dece.
    6. Luiz de Mello, 2007. "Local Government Finances: The Link between Intergovernmental Transfers and Net Worth," OECD Economics Department Working Papers 581, OECD Publishing.
    7. Torres Ortega, José Marcelo & Ortega De La Rosa, Jorge Mario, 2022. "Efecto flypaper: estudio de caso para los municipios colombianos, periodo 2000-2017," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue No. 97, pages 79-111, May.
    8. Muinelo-Gallo, Leonel & Azar, Paola, 2018. "Testing regional intergovernmental transfers asymmetries in Uruguay," MPRA Paper 90245, University Library of Munich, Germany.
    9. Asharani Samal, 2020. "An Empirical Analysis of Asymmetry and Threshold Effect of Intergovernmental Grants in India: A Panel Data Analysis," Global Business Review, International Management Institute, vol. 21(2), pages 458-472, April.
    10. Santiago Lago-Peñas, 2008. "Local Governments' Asymmetric Reactions to Grants," Public Finance Review, , vol. 36(2), pages 219-242, March.
    11. Yihua Yu & Jing Wang & Xi Tian, 2016. "Identifying the Flypaper Effect in the Presence of Spatial Dependence: Evidence from Education in China's Counties," Growth and Change, Wiley Blackwell, vol. 47(1), pages 93-110, March.
    12. Luigi Marattin & Tommaso Nannicini & Francesco Porcelli, 2022. "Revenue vs expenditure based fiscal consolidation: the pass-through from federal cuts to local taxes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(4), pages 834-872, August.
    13. Thushyanthan Baskaran, 2016. "Intergovernmental Transfers, Local Fiscal Policy, and the Flypaper Effect: Evidence from a German State," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 72(1), pages 1-40, March.
    14. Juan González Alegre, 2012. "An evaluation of EU regional policy. Do structural actions crowd out public spending?," Public Choice, Springer, vol. 151(1), pages 1-21, April.
    15. Elena Gennari & Giovanna Messina, 2014. "How sticky are local expenditures in Italy? Assessing the relevance of the flypaper effect through municipal data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(2), pages 324-344, April.
    16. Vittoria Idrisova & Lev Freinkman, 2010. "Impact of Federal Transfers over Regional Authorities Behavior," Research Paper Series, Gaidar Institute for Economic Policy, issue 137P.
    17. Kopańska Agnieszka, 2018. "Partial Fiscal Decentralization and Local Government Spending Policy," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 14(3), pages 21-31, September.
    18. Shani, Ron & Reingewertz, Yaniv & Vigoda-Gadot, Eran, 2023. "Intergovernmental grants and local public finance: An empirical examination in Israel," European Journal of Political Economy, Elsevier, vol. 79(C).
    19. Pablo Acosta, 2010. "The “flypaper effect” in presence of spatial interdependence: evidence from Argentinean municipalities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 44(3), pages 453-466, June.
    20. Helm, Ines & Stuhler, Jan, 2021. "The Dynamic Response of Municipal Budgets to Revenue Shocks," IZA Discussion Papers 14369, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    decentralization; federal transfers; flypaper; local governments; Mexico; Latin America;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:emx:esteco:v:28:y:2013:i:1:p:165-186. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ximena Varela (email available below). General contact details of provider: https://edirc.repec.org/data/cecolmx.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.