The magnitude of flypaper effect is an increasing function of the municipalitys economic wellbeing. Flypaper, an american crime comedy film starring patrick dempsey and ashley judd the flypaper, an episode of tales of the unexpected based on a short story by elizabeth taylor. In this paper, four of the bestknown explanations of the flypaper effect are tested, using data from michigan school districts. The size of flypaper effect in decentralizing indonesia munich. Working paper 14579 national bureau of economic research. Intergovernmental transfers and the flypaper effect in. This study estimates the flypaper effect of intergovernmental transfers in the.
Table 1 lists some of the most commonly cited studies. We investigate the phenomenon of flypaper effect and its relationship with the local tax effort by using a panel data comprising approximately 48 percent of the mexican municipalities. When a dollar of exogenous grants to a community leads to significantly greater public spending than an. Types of data use secondary data about regionally original income, general allocation fund, special allocation fund, taxsharing fund, and regionally spending in 20162017. This paper analyses the effects of a oneoff fiscal restriction on flemish local government spending.
Covering data from 20002014, the paper shows that grants stimulate overspending by local governments even though spatial interdependence is carefully treated. In short, grants reduce the perceived marginal cost of recipient government output. Fungibility and the flypaper effect of project aid. Specifically, this paper aims to determine the existence of the flypaper effect on the spending behavior of provinces. The flypaper effect is a concept from the field of public finance that suggests that a government. This paper studies the role of fiscal limitations in explaining the flypaper effect in flemish municipalities. Flypaper effect, an economic assertion that money sticks where it hits flypaper theory disambiguation. The flypaper effect of local revenue and unconditional grant on local expenditure in regenciesmunicipality in west java of the 200920. Conclusionin this paper we investigate the phenomenon of flypaper effect and its relation to the local tax effort, by using a panel data comprising approximately 48% of the mexican municipalities. Penelitian ini serupa dengan penelitian deller, maher dan lledo 2007 dengan meneliti fenomena flypaper effect di wis. Introduction the flypaper effect relates to the impact on exhaustive expenditures of a. In section ii we present the criterion to judge the existence of the flypaper effect as given by fisher1982. An alternate model is presented to argue that the flypaper effect arises from the uncertainty and instability of grant revenue and riskaverse behavior by local officials.
Empirical results indicate that the marginal effects of municipal own. Jacobys study 2002 assesses the impact of a school feeding program in the philippines on child. The flypaper effect can be attributed to the substantial local autonomy given to local governments since the advent of decentralization in 1991. The variation comes from whether the estimated flypaper effect is simply large or if it is enormous. Flypaper 1997 film wikimili, the free encyclopedia. The flypaper effect is a concept from the field of public finance that suggests that a government grant to a recipient municipality increases the level of local public spending more than an increase in local income of an equivalent size. Before and after the implementation of accrual government accounting standards this study aims to determine the occurrence of flypaper effect on local governments before and after the implementation of accounting standards governmentbased accruals. A minimalist model of federal grants and flypaper effects.
The method used in this research is multiple regression and. In 2009, local governments were confronted with restrictions of local fiscal autonomy. Sep 14, 2011 we investigate the phenomenon of flypaper effect and its relationship with the local tax effort by using a panel data comprising approximately 48 percent of the mexican municipalities. Finally, concluding remarks are presented in section 5. Two competing theories dominate in this discussion. This study explores the flypaper effect in indonesia using a spatial approach. The elasticity of lumpsum grants to expenditure is stronger than the elasticity of matching grants. The flypaper effect is the prediction that increases in. Tax limitations and the flypaper effect in flemish local. Evidence of intrahousehold flypaper effects from a nutrition. First, a legislative bargaining model developed in this paper provides a critique of this empirical. Mental accounting of public funds the flypaper effect in. Flypaper effect is a condition which the stimulus of local spending caused by changes in central government transfers has a greater effect than the stimulus that caused by changes in local income oates, 1999. What happens to a states spending when it receives an unconditional grant from the federal government.
Flypaper effect is a condition in which local governments respond too much in spending the grants transfers procured by dau general. Yet much of the empirical literature shows that local governments use transfers primarily to increase expenditures. Flypaper effect itu sendiri merupakan respon yang tidak simetri atau asimetris terhadap peningkatan dan penurunan penggunaan dana transfer dari pemerintah pusat, tresch 2002. The objective of this research is to investigate of occurrence of flypaper effect in local revenue and unconditionaly grant on local expenditure in regenciesmunicipality in west java of the 200920. The analysis is of both the recipient and payee governments. Analysis of flypapaer effect in general allocation fund. Pdf mexican municipalities and the flypaper effect. This paper recognizes that intergovernmental transfers are determined through a. We investigate the phenomenon of flypaper effect and its relationship with the local tax effort by using a panel data comprising. The fiscal limitations thus strengthen the flypaper effect and should be considered explanatory variables of this effect. In this paper, four of the bestknown explanations of the flypaper effect are tested, using data. Finally, using time series data for provinces of iran during 200020 estimation and.
Work in the us and canada has found the flypaper effect to be evident at the national as well as the sub. The stimulative effects of intergovernmental grants and. Total downloads of all papers by francesco porcelli. The flypaper effect is investigated by comparing the effects of income.
Our estimations based on the fixed effect and difference gmm estimators confirm the existence of flypaper effect. University of groningen fiscal equalization, capitalization. The flypaper effect refers to the phenomenon whereby expenditure stimulus from unconditional grants. Published in volume 9, issue 4, pages 217226 of journal of economic perspectives, fall 1995, abstract. Each local government voluntarily agreed to not increase local tax rates, to not introduce new taxes for at least one year, to eliminate some business taxes and to implement a transparent fiscal. Nov 01, 1991 the flypaper effect is the common empirical result that lumpsum intergovernmental grants stimulate more local government spending than increases in private income which are theoretically equivalent. Fiscal illusion and the grantor government journal of. Similar to other flypaper effect studies, the existence of the flypaper effect in provincial governments for the period 2001 to 2006 is verified. Ghana microenterprise growth and the flypaper effect. No statistical evidence in support of the flypaper hypothesis within the context of municipal expenditures in south africa is found. Pdf intergovernmental transfers and the flypaper effect in. Flypaper effect meaning flypaper effect definition flypa.
The flypaper effect also has positive effect on the next year local expenditure. We measure the preference to redistribute when transfers are made either out of individual accounts the players own money or out of a common account the groups money. Results obtained in the present study show the flypaper effect to be vindicated. Recent contributions have revisited this so called flypaper effect by using quasiexperimental methods, and some have found that the evidence for the flypaper effect dissipates once endogeneity of transfer receipts is accounted for. Mar 24, 2003 the flypaper effect has been described as money sticks where it hits. Using the model insights and previous estimates, i show that a tax rate between 8% to 16% would account for the flypaper effect observed in u. These findings demonstrate that fiscal limitations changed the local governments revenue structure significantly. Theory suggests that transfers should have an effect on local fiscal policy that is similar to an equivalent increase in local incomes. Sampurna budi utama dan syahrul 2011 kabupaten kota di indonesia periode 20052009 pad, unconditional grant, pdrb, belanja daerah tidak menemukan adanya flypaper effect. The flypaper effect is the empirical observation that increases in intergovernmental aid stimulate.
The present study attempted to experimentally analyze the effect of fiscal illusion in the form of flypaper effect on spending demand levels of provincial governments in iran. The flypaper effect and political strength springerlink. Pdf flypaper effect is a wellknown phenomenon in public finance with regard to intergovernmental transfer. Minimum spending in education and the flypaper effect center for. The study also tests the asymmetry hypothesis that looks at the impact of retrenchment in grants.
An experiment on underreporting and overdeducting, arqus discussion papers in quantitative tax research. Object of this study was all of the districts and cities in south sumatera for the period 20082011 with data compiled from the region budget of revenue. Indonesia is an archipelagic country consisting of 33 provinces and 524 districts. Mexican municipalities and the flypaper effect cardenas. Some estimates of the flypaper effect tional grant receipts are associated with greater government spending. Our discussion paper series is available to download at. Flypaper effect is the main discussion in this study. Flypaper effect and factors affecting regional government.
Flypaper effect itu sendiri merupakan respon yang tidak simetri atau asimetris. Apr 23, 2015 the idea that money sticks where it hits was dubbed the flypaper effect by arthur okun. Simple models of local government behavior predict equal effects of private income and unconditional federal grants on local government expenditures. Empirical studies indicate that unconditional intergovernmental grants have a flypaper effect. Finally, using time series data for provinces of iran during 200020.
The flypaper effect results when a dollar of exogenous grantsinaid leads to significantly greater public. Studying the flypaper effect in the provinces of iran 200020. This paper uses the methodology developed by robert r. Capitalization indicates how people value the way in which municipalities spend their money and in this respect, it offers a new perspective on the flypaper effect. Diterima dan disetujui pada tanggal 18 oktober 2016. Request pdf intergovernmental transfers and the flypaper effect in turkey intergovernmental transfers can affect the level of local expenditures. Through randomized experiment in ghana, researchers tested two methods of aid delivery for microenterprises inkind grant that must be spent directly on the business, and a cash grant, which the owners can choose to spend how they like. Several authors have modeled recipient government spending under fiscal illusion to explain this phenomenon. The significance of spatial factors has been highlighted in the study. Using crosssection data for 243 urban local governments, the paper examines the flypaper effect, that is, the expenditure stimulus of grants from the state government to the urban governments. Ii theoretical and empirical studies on the flypaper effect the flypaper effect led to a theoretical research to explain the phenomenon.
Intergovernmental transfers and the flypaper effect in turkey. Flypaper lets you adjust the parameters on each of the elements you add, thus letting you choose the moment in which your photo will appear, the dimensions for the animations main video, exactly where text, buttons and other interactive elements will appear, if any effects will be included, and much more. New jersey enacted an income tax in 1976 in response to a state supreme court ruling that held that local taxation alone violated the requirement of the state constitution that all children receive. Dau dan pad berpengaruh positif dan signifikan terhadap belanja daerah. Pdf intergovernmental transfers and the flypaper effect. Viewing governments as agents for a representative citizen voter, this empirical result is an anomaly. Courant, gramlich, rubinfeld 1979, the stimulative effects of intergovernmental grants pdf. Gramlich 1977, inman 1979 and fisher 1982 survey the earlier flypaper literature, while wyckoff 1991 offers a more recent treatment. The flypaper effect literature dates back three decades. Although the studies were done with a variety of approaches and data sets, the bottom line is what most concerns us here. This study aimed to analyze the effect of the general allocation fund dau and regional original income. Analisis flypaper effect belanja daerah kabupatenkota di. The present study empirically tests the flypaper effect for the indian economy.
The study focuses on the ira in the philippines and its impact on the behavior of provinces in general. Pdf download we test the hypothesis that the flypaper effect can arise if the recipient government finances part of its expenditures with a distortionary tax. Flypaper effect the term of flypaper effect was first introduced by courant, gramlich, and rubinfeld 1979 to articulate arthur okuns 1930 thought that money sticks where it hits kuncoro 2007. Analysis of flypapaer effect in general allocation fund and. Flypaper effects are more challenging to detect with cash transfers, as cash is.
This anomaly has come to be known as the flypaper effect. This study explores the flypaper effect in indonesia using a spatial. We report evidence from a series of laboratory experiments that focus on mental accounting of public funds. When a dollar of exogenous grants to a community leads to significantly greater public spending than an equivalent dollar of citizen income. Fiscal illusion, uncertainty, and the flypaper effect sciencedirect. Recent contributions have revisited this so called flypaper effect by using quasiexperimental methods, and some have found that the evidence. Microevidence for vietnam world bank policy research working paper no. We cannot reject that grants and private income have equal effects in local governments with a strong political leadership, while the flypaper effect is large in. Identifying areas for further research springerlink. The impact of internal revenue allotment on philippine provinces, novemberdecember 2008. They result in an increase of expenditures due to the increasing dependence on grants since 2009. Studying the flypaper effect in the provinces of iran. Again, this result support the indication that the decentralization has not been successfully implemented in indonesia. In section 4, the source of the flypaper effect will be investigated.
Flypaper effect analysis of district and city regionally spending in sulawesithis study aims to determine the phenomenon of flypaper effect of regionally spending in sulawesi. All studies surveyed report some degree of flypaper. Groups of three players decide upon how much to redistribute within the group. The size of flypaper effect in decentralizing indonesia.
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