The elusive flypaper effect

Article Abstract:

The observation that lump-sum intergovernmental aid generates more local government spending than private income is commonly referred to as the flypaper effect. Previous analyses offer different reasons for this phenomenon, including econometric misspecification, omitted variables, the use of the average price of public goods by voters, and the lack of awareness among voters of the existence of intergovernmental grants. These four explanations were tested in this paper using data from Michigan school districts. No sufficient evidence was found to support any one of these explanations. It was suggested that local decision-making may have a more significant influence on the flypaper effect.

Government spending policy, Expenditures, Public, Public expenditures, Local government, Local finance

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Capital-biased subsidies, bureaucratic monitoring, and bus scrapping

Article Abstract:

A hypothesis is developed which states that capital-biased subsidies to public transit increase the probability that buses will be scrapped, decreasing the expected useful life of buses, and wasting resources. Bureaucratic monitoring programs which require approval before buses are scrapped have been instituted by local governments to prevent the premature scrapping of buses. Probit model estimates using data taken from Ontario, Canada support the hypothesis that capital-biased subsidies increase the probability of scrapping, but do not support the hypothesis that monitoring prevents premature scrapping.

Transportation policy, Subsidies, Local transit

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A bureaucratic theory of flypaper effects

Article Abstract:

A bureaucratic model of the type suggested by Niskanen can be used to explain why a disproportionate amount of lump-sum intergovernmental aid is used to increase expenditures rather than reduce taxes. An empirical test of the bureaucratic model using 115 small governments in Michigan suggests that the bureaucratic model explains capital expenditures well. However, the standard median voter model is better for explaining operating expenditures.

Public finance, Bureaucracy

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