The Flypaper Effect

James Hines and Richard Thaler

Journal of Economic Perspectives, 1995, vol. 9, issue 4, 217-226

Abstract: What happens to a state's spending when it receives an unconditional grant from the federal government? The standard theoretical analysis predicts that the increase in spending will be the same as that generated by an equivalent increase in local incomes--or roughly 5-10 percent for most states. In contrast, numerous empirical analyses have found that spending increases by much more, with some estimates near 100 percent. This result is known as the 'flypaper effect,' since the money appears to 'stick where it hits.' The authors review this evidence as well as other studies that find similar behavior in firms.

JEL-codes: H77 (search for similar items in EconPapers)
Date: 1995
Note: DOI: 10.1257/jep.9.4.217
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (355)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/jep.9.4.217 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:jecper:v:9:y:1995:i:4:p:217-26

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

Journal of Economic Perspectives is currently edited by Enrico Moretti

More articles in Journal of Economic Perspectives from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().