The "Flypaper Effect" Is Not an Anomaly
The empirical nonequivalence between grants by a central government and increases in community income (the "flypaper effect") has been considered anomalous. But the "anomaly" label is na*ve: in a multiconsumer community, equivalence demands an unlikely match of tax rules and income-growth patterns. We go beyond the single-policy-variable, median-voter model and apply Roemer's concept of Party Unanimity Nash Equilibrium, which allows for party competition in multidimensional policy spaces. We compute the equilibria for a model with two independent policy variables (intercept and slope of an affine tax schedule) and obtain numerical values that agree with the empirical literature. Copyright 2002 by Blackwell Publishing Inc.
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Volume (Year): 4 (2002)
Issue (Month): 1 ()
Pages: 1-17
| Handle: | RePEc:bla:jpbect:v:4:y:2002:i:1:p:1-17 |
| Contact details of provider: | Web page: http://www.blackwellpublishing.com/journal.asp?ref=1097-3923 More information through EDIRC
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References listed on IDEAS
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