Wisconsin Local Government, State Shared Revenues and the Illusive Flypaper Effect
AbstractThis study focuses on the impacts state shared revenues has on local government finances. Specifically we examine what is referred to in the academic literature as the "flypaper effect." Using a simple model of local fiscal behavior Bradford and Oates (1971a, 1971b) predict that aids to local governments is the equivalent to cash transfers to local constituents. Thus aids to local governments should have the same impact on local government spending as does increases in local personal income. Empirical studies, however, have found that aids to local governments has a much greater simulative affect on local spending than does a comparable increase in the income of local constituents. Private income is disproportionately spend on private consumption while aids, income received by local governments, is primarily spent on public services.
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Bibliographic InfoPaper provided by University of Wisconsin, Agricultural and Applied Economics in its series Staff Paper Series with number 451.
Date of creation: Jul 2002
Date of revision:
Other versions of this item:
- Steven Deller & Craig Maher & Victor Lledo, 2002. "Wisconsin Local Government, State Shared Revenues and the Illusive Flypaper Effect," Wisconsin-Madison Agricultural and Applied Economics Staff Papers 451, Wisconsin-Madison Agricultural and Applied Economics Department.
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