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Mexican Flypaper: Money Sticks Where it Hits . . . But Every Time?
Author(s) -
Espinosa Salvador
Publication year - 2011
Publication title -
latin american policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.195
H-Index - 4
eISSN - 2041-7373
pISSN - 2041-7365
DOI - 10.1111/j.2041-7373.2011.00036.x
Subject(s) - economics , mistake , decentralization , revenue , panel data , public economics , transfer payment , government (linguistics) , econometrics , finance , political science , market economy , welfare , linguistics , philosophy , law
This article uses the flypaper effect theory to analyze the asymmetric effect of revenue‐sharing transfers on spending by state governments in Mexico. Studies in the field commonly assume that the expenditure response to a marginal change in a transfer is the same across the board, but the characteristics of each local government can be so different that the assumption seems unrealistic. This article uses a panel of 31 Mexican states to derive effect measures for each entity. The analysis shows that differences in the spending outcomes exist and that there is a connection between the magnitude of the response and the income level of the recipient. If the goal is to attain a sustainable fiscal decentralization, it would be a mistake to assume that all states behave in the same way.