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Categorical Municipal Expenditures with a Focus on the Flypaper Effect
Author(s) -
Deller Steven C.,
Maher Craig S.
Publication year - 2005
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/j.1540-5850.2005.00368.x
Subject(s) - categorical variable , revenue , public economics , recreation , local government , economics , business , public administration , political science , finance , statistics , mathematics , law
Using data for Wisconsin cities and villages the effects of grants in aid from state government on 10 categories of municipal expenditures are examined. We build on the traditional grants in aid public finance literature by looking for evidence of the flypaper effect. By focusing on the Wisconsin state shared revenues program, a pure grant of considerable size for many Wisconsin municipalities, we offer a clean test of the flypaper effect. We find a positive flypaper effect on 8 of the 10 categorical expenditures. We also find the impact of unconditional grants on categorical expenditures is stronger on nonessential “luxury” goods (e.g., parks and recreation, culture, and educational services) than on essential “normal” municipal goods (e.g., police and fire protection).