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

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  • Bruno Heyndels

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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  • Bruno Heyndels, 2001. "Asymmetries in the flypaper effect: empirical evidence for the Flemish municipalities," Applied Economics, Taylor & Francis Journals, vol. 33(10), pages 1329-1334.
  • Handle: RePEc:taf:applec:v:33:y:2001:i:10:p:1329-1334
    DOI: 10.1080/00036840010004536
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    1. Glazer, A. & Boarnet, M.G., 1996. "An Information Explanation for the Flypaper Effect," Papers 95-96-6, California Irvine - School of Social Sciences.
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    Cited by:

    1. 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.
    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. 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;The Association for Cultural Economics International, vol. 32(1), pages 35-58, March.
    4. Yihua Yu & Jing Wang & Xi Tian, 2016. "Identifying the Flypaper Effect in the Presence of Spatial Dependence: Evidence from Education in China's Counties," Growth and Change, Wiley Blackwell, vol. 47(1), pages 93-110, March.
    5. Geys, Benny & Konrad, Kai A., . "Federalism and optimal allocation across levels of governance," Chapters in Economics, University of Munich, Department of Economics.
    6. Gabriella Legrenzi & Costas Milas, 2006. "Asymmetric and Non-Linear Adjustments in Local Fiscal Policy," Keele Economics Research Papers KERP 2006/16, Centre for Economic Research, Keele University.
    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;International Institute of Public Finance, vol. 21(2), pages 324-344, April.
    9. Pablo Acosta, 2010. "The “flypaper effect” in presence of spatial interdependence: evidence from Argentinean municipalities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 44(3), pages 453-466, June.
    10. 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, July.
    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.
    12. Phuong Nguyen-Hoang & Yilin Hou, 2014. "Local Fiscal Responses to Procyclical Changes in State Aid," Publius: The Journal of Federalism, Oxford University Press, vol. 44(4), pages 587-608.
    13. Luiz de Mello, 2007. "Local Government Finances: The Link between Intergovernmental Transfers and Net Worth," OECD Economics Department Working Papers 581, OECD Publishing.
    14. repec:taf:rjapxx:v:22:y:2017:i:4:p:560-574 is not listed on IDEAS

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