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Flypaper Effect: Causes and Demonstration in the Budgetary System of Russia

Evgeny N. Timushev ()
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Evgeny N. Timushev: Institute of Socio-Economic and Power Problems of the North, Komi Scientific Center, Ural Branch of the Russian Academy of Sciences, Syktyvkar 167982, the Komi Republic, Russia

Finansovyj žhurnal — Financial Journal, 2017, issue 5, 60-70

Abstract: The concept of the flypaper effect — the non-identity of increase in the amount of transfer and the equivalent increase in private income for the budget expenditures — is one of the methodological forms of intergovernmental relations analysis. It helps to assess the nature of the relationship between governmental entities in the sphere of public finance in general. The analysis of the literature on the causes of the phenomenon allowed the author to group them. Application of the causes selected to the peculiarities of the budgetary system of the Russian Federation helped to add such factors of the flypaper effect as the composition of transfers (a significant role of the discretionary balancing grant), the nature of taxation (prevalence of indirect taxes) and features of the allocation of earmarked grants (co-financing towards the end of the year). The explanation of the flypaper effect with the use of lines of supply and demand for public goods is considered as a consequence of the standardization of budget expenditures and limited region tax authorities.

Keywords: flypaper effect; causes of the flypaper effect; expenditure; intergovernmental transfer; tax burden; demand and supply of public goods; elasticity (search for similar items in EconPapers)
JEL-codes: H77 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:fru:finjrn:170505:p:60-70