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The “Flypaper Effect” Is Not an Anomaly
Author(s) -
Roemer John E.,
Silvestre Joaquim
Publication year - 2002
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/1467-9779.00085
Subject(s) - unanimity , economics , equivalence (formal languages) , ricardian equivalence , microeconomics , anomaly (physics) , variable (mathematics) , econometrics , majority rule , mathematical economics , fiscal policy , macroeconomics , mathematics , computer science , physics , mathematical analysis , condensed matter physics , discrete mathematics , artificial intelligence , political science , law
The empirical nonequivalence between grants by a central government and increases in community income (the “flypaper effect”) has been considered anomalous. But the “anomaly” label is naïve: in a multiconsumer community, equivalence demands an unlikely match of tax rules and income‐growth patterns. We go beyond the single‐policy‐variable, median‐voter model and apply Roemer’s concept of Party Unanimity Nash Equilibrium, which allows for party competition in multidimensional policy spaces. We compute the equilibria for a model with two independent policy variables (intercept and slope of an affine tax schedule) and obtain numerical values that agree with the empirical literature.