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Asymmetries in the flypaper effect: empirical evidence for the Flemish municipalities

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  • Bruno Heyndels

Abstract

Recent empirical work on US governments indicates an asymmetry in the flypaper effect: the elasticity of public spending with respect to changes in grants differs significantly for positive and negative changes. Using a panel of data on Flemish municipalities covering the period 1989-1996, we also find clear evidence of asymmetrical reactions. More precisely, the results suggest the presence of a fiscal replacement type of asymmetry: when grants grow, municipalities spend most of the additional revenue. However, when grants fall, spending is unaffected and municipalities compensate the loss through additional taxation.

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  • 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.
    • Handle: RePEc:taf:applec:v:33:y:2001:i:10:p:1329-1334
    DOI: 10.1080/00036840010004536
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    1. Glazer, A. & Boarnet, M.G., 1996. "An Information Explanation for the Flypaper Effect," Papers 95-96-6, California Irvine - School of Social Sciences.
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