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The Flypaper Effect Revisited

  • Fernando Aragon

This paper argues that there is nothing anomalous about the flypaper effect. Idevelop a simple median voter model of government spending with costly taxcollection that predicts the flypaper effect and provide a quantifiable measure of itsmagnitude. Using the model insights and previous estimates, I show that a tax ratebetween 8% to 16% would account for the flypaper effect observed in U.S. subnationalgovernments.

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File URL: http://sticerd.lse.ac.uk/dps/eopp/eopp04.pdf
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Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Economic Organisation and Public Policy Discussion Papers Series with number 004.

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Date of creation: Jan 2009
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Handle: RePEc:cep:stieop:004
Contact details of provider: Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

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  1. Roemer, John E & Silvestre, Joaquim, 2002. " The "Flypaper Effect" Is Not an Anomaly," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(1), pages 1-17.
  2. Joel Slemrod, 1989. "Optimal Taxation and Optimal Tax Systems," NBER Working Papers 3038, National Bureau of Economic Research, Inc.
  3. van de Walle, Dominique & Ren Mu, 2007. "Fungibility and the flypaper effect of project aid : micro-evidence for Vietnam," Policy Research Working Paper Series 4133, The World Bank.
  4. Shah, Anwar, 2006. "A practitioner's guide to intergovernmental fiscal transfers," Policy Research Working Paper Series 4039, The World Bank.
  5. Hamilton, Bruce W., 1983. "The flypaper effect and other anomalies," Journal of Public Economics, Elsevier, vol. 22(3), pages 347-361, December.
  6. 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.
  7. Bradford, David F & Oates, Wallace E, 1971. "An Analysis of Revenue Sharing in a New Approach to Collective Fiscal Decisions," The Quarterly Journal of Economics, MIT Press, vol. 85(3), pages 416-39, August.
  8. Hamilton, Jonathan H., 1986. "The flypaper effect and the deadweight loss from taxation," Journal of Urban Economics, Elsevier, vol. 19(2), pages 148-155, March.
  9. Brian Knight, 2002. "Endogenous Federal Grants and Crowd-out of State Government Spending: Theory and Evidence from the Federal Highway Aid Program," American Economic Review, American Economic Association, vol. 92(1), pages 71-92, March.
  10. Turnbull, Geoffrey K., 1998. "The Overspending and Flypaper Effects of Fiscal Illusion: Theory and Empirical Evidence," Journal of Urban Economics, Elsevier, vol. 44(1), pages 1-26, July.
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