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Income Heterogeneity and the Flypaper Effect

  • Witterblad, Mikael

    ()

    (Department of Economics, Umeå University)

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    The purpose of this paper is to analyze the determinants of the local public expenditures and, in particular, try to explain the so called ’flypaper effect’. The analysis uses a political economy model to relate the existence and size of the flypaper effect to observable municipal characteristics such as the average tax base, income dispersion andwhether or not a change in the average tax base affects the tax share of the majority voter. The empirical part of the study is based on Swedish data on municipal expenditures and revenues for the period 1996-2004. The results show that the size of the flypaper effect varies among municipalities depending on the relative composition of grant and tax base.

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    File URL: http://www.econ.umu.se/DownloadAsset.action?contentId=48259&languageId=3&assetKey=ues718
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    Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 718.

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    Length: 39 pages
    Date of creation: 19 Oct 2007
    Date of revision:
    Handle: RePEc:hhs:umnees:0718
    Contact details of provider: Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
    Phone: 090 - 786 61 42
    Fax: 090 - 77 23 02
    Web page: http://www.econ.umu.se/Email:


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