Umeå Economic Studies, Department of Economics, Umeå University
No 718:
Income Heterogeneity and the Flypaper Effect
Mikael Witterblad ()
Abstract: The purpose of this paper is to analyze the determinants
of the local public expenditures and, in particular, try to explain the so
called ’flypaper effect’. The analysis uses a political economy model to
relate the existence and size of the flypaper effect to observable
municipal characteristics such as the average tax base, income dispersion
andwhether or not a change in the average tax base affects the tax share of
the majority voter. The empirical part of the study is based on Swedish
data on municipal expenditures and revenues for the period 1996-2004. The
results show that the size of the flypaper effect varies among
municipalities depending on the relative composition of grant and tax
base.
Keywords: Income Dispersion; Local Public Expenditures; Intergovernmental Relations; (follow links to similar papers)
JEL-Codes: D31; H72; H77; (follow links to similar papers)
39 pages, October 19, 2007
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