WISCONSIN LOCAL GOVERNMENT, STATE SHARED REVENUES AND THE ILLUSIVE FLYPAPER EFFECT

Steven Deller (), Craig Maher and Victor Lledo

No 12599, Staff Papers from University of Wisconsin-Madison, Department of Agricultural and Applied Economics

Abstract: This study focuses on the impacts state shared revenues has on local government finances. Specifically we examine what is referred to in the academic literature as the "flypaper effect." Using a simple model of local fiscal behavior Bradford and Oates (1971a, 1971b) predict that aids to local governments is the equivalent to cash transfers to local constituents. Thus aids to local governments should have the same impact on local government spending as does increases in local personal income. Empirical studies, however, have found that aids to local governments has a much greater simulative affect on local spending than does a comparable increase in the income of local constituents. Private income is disproportionately spend on private consumption while aids, income received by local governments, is primarily spent on public services.

Keywords: Public; Economics (search for similar items in EconPapers)
Pages: 16
Date: 2002
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https://ageconsearch.umn.edu/record/12599/files/stpap451.pdf (application/pdf)

Related works:
Working Paper: Wisconsin Local Government, State Shared Revenues and the Illusive Flypaper Effect (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:wisagr:12599

DOI: 10.22004/ag.econ.12599

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