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

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  • Bruno Heyndels
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    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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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 33 (2001)
    Issue (Month): 10 ()
    Pages: 1329-1334

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    Handle: RePEc:taf:applec:v:33:y:2001:i:10:p:1329-1334

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    Cited by:
    1. Geys, Benny & Heinemann, Friedrich & Kalb, Alexander, 2008. "Voter Involvement, Fiscal Autonomy and Public Sector Efficiency: Evidence from German Municipalities," ZEW Discussion Papers 08-024, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. John Ashworth & Bruno Heyndels, 2005. "Government Fragmentation And Budgetary Policy In "Good" And "Bad" Times In Flemish Municipalities," Economics and Politics, Wiley Blackwell, vol. 17, pages 245-263, 07.
    3. Kristien Werck & Bruno Heyndels & Benny Geys, 2008. "The impact of ‘central places’ on spatial spending patterns: evidence from Flemish local government cultural expenditures," Journal of Cultural Economics, Springer, vol. 32(1), pages 35-58, March.
    4. Gabriella Deborah Legrenzi, 2009. "Asymmetric and Non-Linear Adjustments in Local Fiscal Policy," CESifo Working Paper Series 2550, CESifo Group Munich.
    5. Pablo Acosta, 2010. "The “flypaper effect” in presence of spatial interdependence: evidence from Argentinean municipalities," The Annals of Regional Science, Springer, vol. 44(3), pages 453-466, June.
    6. Benny Geys & Federico Revelli, 2011. "Economic and political foundations of local tax structures: an empirical investigation of the tax mix of Flemish municipalities," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 29(3), pages 410-427, June.
    7. Richard Hawkins & Sally Wallace, 2006. "Source of income effects for demand decisions and taxable consumption," Applied Economics, Taylor & Francis Journals, vol. 38(20), pages 2371-2379.
    8. 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, vol. 21(2), pages 324-344, April.
    9. Geys, Benny & Konrad, Kai A., 2010. "Federalism and optimal allocation across levels of governance," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" SP II 2010-09, Social Science Research Center Berlin (WZB).
    10. Luiz de Mello, 2007. "Local Government Finances: The Link between Intergovernmental Transfers and Net Worth," OECD Economics Department Working Papers 581, OECD Publishing.
    11. 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.

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