The flypaper effect and the deadweight loss from taxation

Article Abstract:

Several theoretical models have been developed to explain the propensities of local governments to buy public goods with the income of residents and with grants from state and federal government agencies. This is called the 'flypaper effect' because money sticks where it hits. The flypaper effect has been used to support models of strategic bureaucratic behavior and other non-social welfare-maximizing behavior. Another rationale is identified that states the flypaper effect is consistent with maximization of the utility of a representative consumer as a result of local taxation, producing deadweight loss. Models of strategic bureaucratic behavior or voter misperceptions are therefore not required to explain the flypaper effect.

Models, Taxation, Tax administration and procedure, Tax administration, Government spending policy, Municipal government

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A note on measuring flypaper effects

Article Abstract:

Selective or earmarked lump-sum grants commonly offered by donor governments have predicted effects that are different from those associated with general lump-sum grants. The distinction is valuable when the selective lump-sum allocation is for some use in which a matching grant is also relevant. State assistance to local secondary and elementary schools is a relevant example of this difference: 1983 aid formulas were such that local school outlays were subject to matching state aid in almost half the states.

Grants-in-aid, Revenue sharing, Block grants

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Increasing returns and perfect competition: the role of land

Article Abstract:

A study about the classical inconsistency between increasing returns and perfect competition is presented. Examples demonstrating that perfect competition and increasing returns can be consistent by extending the Alonso model to include production are highlighted.

Administration of General Economic Programs, Grants to Business, Competition (Economics), Equilibrium (Economics)

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