The Flypaper Effect
What happens to a state's spending when it receives an unconditional grant from the federal government? The standard theoretical analysis predicts that the increase in spending will be the same as that generated by an equivalent increase in local incomes--or roughly 5-10 percent for most states. In contrast, numerous empirical analyses have found that spending increases by much more, with some estimates near 100 percent. This result is known as the 'flypaper effect,' since the money appears to 'stick where it hits.' The authors review this evidence as well as other studies that find similar behavior in firms.
Volume (Year): 9 (1995)
Issue (Month): 4 (Fall)
|Contact details of provider:|| Web page: https://www.aeaweb.org/jep/|
More information through EDIRC
|Order Information:||Web: https://www.aeaweb.org/subscribe.html|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Helen F. Ladd, 1993. "State responses to the TRA86 revenue windfalls: A new test of the flypaper effect," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 82-103.
- Lankford, R. Hamilton, 1987. "A note on measuring flypaper effects," Journal of Urban Economics, Elsevier, vol. 22(1), pages 113-115, July.
- repec:ntj:journl:v:47:y:1994:i:no._4:p:799-816 is not listed on IDEAS
- Hamilton, Bruce W., 1983. "The flypaper effect and other anomalies," Journal of Public Economics, Elsevier, vol. 22(3), pages 347-361, December.
- Daniel Kahneman & Jack L. Knetsch & Richard H. Thaler, 1991. "Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 193-206, Winter.
- Wyckoff, Paul Gary, 1991. "The elusive flypaper effect," Journal of Urban Economics, Elsevier, vol. 30(3), pages 310-328, November.
- Moffitt, Robert A., 1984. "The effects of grants-in-aid on state and local expenditures : The case of AFDC," Journal of Public Economics, Elsevier, vol. 23(3), pages 279-305, April.
- Filimon, Radu & Romer, Thomas & Rosenthal, Howard, 1982. "Asymmetric information and agenda control : The bases of monopoly power in public spending," Journal of Public Economics, Elsevier, vol. 17(1), pages 51-70, February.
- Stine, William F., 1994. "Is Local Government Revenue Response to Federal Aid Symmetrical? Evidence From Pennsylvania County Governments in a Era of Retrenchment," National Tax Journal, National Tax Association, vol. 47(4), pages 799-816, December.
- Fisher, Ronald C., 1982. "Income and grant effects on local expenditure: The flypaper effect and other difficulties," Journal of Urban Economics, Elsevier, vol. 12(3), pages 324-345, November.
When requesting a correction, please mention this item's handle: RePEc:aea:jecper:v:9:y:1995:i:4:p:217-26. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros)or (Michael P. Albert)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.