The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Flypaper Effect

  • Robert P. Inman
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_2956

Abstract

The flypaper effect results when a dollar of exogenous grants-in-aid leads to significantly greater public spending than an equivalent dollar of citizen income: money sticks where it hits. Viewing governments as agents for a representative citizen voter, this empirical result is an anomaly. Four alternative explanations have been offered. First, it is a data problem; exogenous aid is mismeasured. Second, it is an econometric problem; important explanators of spending correlated with aid or income are excluded from the specification. Third, it is a specification problem; the representative citizen misperceives aid and the rational voter model misses this point. The empirical evidence suggests none of these explanations is sufficient. A fourth explanation seems most promising: it is politics. Rather than an anomaly, the flypaper effect is best seen as an outcome of political institutions and the associated incentives of elected officials.

Keywords

Flypaper effect Grant aid Political spending Public funds 

JEL Classifications

H72 H77 P16 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Robert P. Inman
    • 1
  1. 1.