Urban Local Governments and the Flypaper Effect: Evidence from Maharashtra, India

Ajit Karnik and Mala Lalvani

Publius: The Journal of Federalism, 2005, vol. 35, issue 2, 273-295

Abstract: This article examines decentralization in the state of Maharashtra in India, especially with respect to the functioning of its urban local governments. Using panel data, the article specifically investigates the flypaper effect of grants from the state government to urban local bodies. It also addresses the asymmetry hypothesis, which states that subnational governments respond differently to a reduction in grants than to an increase. Our results demonstrate the presence of the flypaper effect, but evidence regarding the asymmetric response to a reduction in grants is ambiguous. Copyright 2005, Oxford University Press.

Date: 2005
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