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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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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840010004536
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    Bibliographic Info

    Article provided by Taylor and 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. 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.
    2. Geys, Benny & Heinemann, Friedrich & Kalb, Alexander, 2010. "Voter involvement, fiscal autonomy and public sector efficiency: Evidence from German municipalities," European Journal of Political Economy, Elsevier, vol. 26(2), pages 265-278, June.
    3. Gabriella Deborah Legrenzi, 2009. "Asymmetric and Non-Linear Adjustments in Local Fiscal Policy," CESifo Working Paper Series 2550, CESifo Group Munich.
    4. 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.
    5. 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.
    6. Richard Hawkins & Sally Wallace, 2006. "Source of income effects for demand decisions and taxable consumption," Applied Economics, Taylor and Francis Journals, vol. 38(20), pages 2371-2379.
    7. 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).

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