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Urban Local Governments and the Flypaper Effect: Evidence from Maharashtra, India

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  • Ajit Karnik
  • Mala Lalvani

Abstract

This article examines decentralization in the state of Maharashtra in India, especially with respect to the functioning of its urban local governments. Using panel data, the article specifically investigates the flypaper effect of grants from the state government to urban local bodies. It also addresses the asymmetry hypothesis, which states that subnational governments respond differently to a reduction in grants than to an increase. Our results demonstrate the presence of the flypaper effect, but evidence regarding the asymmetric response to a reduction in grants is ambiguous. Copyright 2005, Oxford University Press.

Suggested Citation

  • 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.
    • Handle: RePEc:oup:publus:v:35:y:2005:i:2:p:273-295
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    File URL: http://hdl.handle.net/10.1093/publius/pji013
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    Cited by:

    1. 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.
    2. Prasant Kumar Panda & Velan Nirmala, 2013. "Central Fiscal Transfers and States' Spending In India: An Analysis of Incentive Effect," Economics Bulletin, AccessEcon, vol. 33(2), pages 1229-1246.
    3. 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.
    4. 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.
    5. Jorge Puig & Alberto Porto, 2022. "On the fiscal behavior of subnational governments. A long-term vision for Argentina," Asociación Argentina de Economía Política: Working Papers 4588, Asociación Argentina de Economía Política.
    6. 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.

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