Mexican Municipalities and the Flypaper Effect

Cárdenas, Oscar; Sharma, Amarendra

doi:10.2139/ssrn.1467338

Cited by 7 publications

(13 citation statements)

References 18 publications

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“…We follow similar model used by Sagbas and Saruç (2004) and Cárdenas and Sharma (2011). We use a panel data set of 838 Turkish municipalities between 1997 and 2005 for the period.…”

Section: Data Model Specification and Estimationmentioning

confidence: 99%

Does Flypaper Effect Exist? New Evidence from Turkish Municipalities

Acar

2019

Sosyoekonomi

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In this paper, we investigate the phenomenon of flypaper effect and its relation to the local tax effort, by using a new and detailed panel data set that consist of all province and district municipalities' fiscal data in Turkey between 1997 and 2005. We use fixed effects and dynamic panel data specific GMM estimators to obtain the results. We provide new evidence using an advanced technique which is firstly used to uncover flypaper effect in Turkey. According to our estimations, the flypaper effect does exist for the Turkish municipalities. This result is robust to various model specifications and econometric techniques. Turkish municipalities also experience substitution effect of unconditional grants on the revenue collection efforts.

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“…We follow similar model used by Sagbas and Saruç (2004) and Cárdenas and Sharma (2011). We use a panel data set of 838 Turkish municipalities between 1997 and 2005 for the period.…”

Section: Data Model Specification and Estimationmentioning

confidence: 99%

Does Flypaper Effect Exist? New Evidence from Turkish Municipalities

Acar

2019

Sosyoekonomi

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“…This actually means that data comparison between different fiscal years could be problematic. Based on the conventional empirical literature concerned with the estimation of expenditure and tax effort effects of intergovernmental transfers (Saruc and Sagbas, 2008;Acosta, 2010;Cardenas and Sharma, 2011), the estimated reduced-form regression model for local government expenditure is described as follows:…”

Section: Methodsmentioning

confidence: 99%

“…Nonetheless, more recent literature has also related expenditure effects of intergovernmental transfers to the local government tax effort, investigating whether those transfers generate stimulation or substitution effect on local tax effort (Baretti et al, 2002;Saruc and Sagbas, 2008;Cardenas and Sharma, 2011), which is related to the efficiency implications of intergovernmental transfers. Namely, if intergovernmental transfers stimulate tax effort, then they also cause efficiency gains, as this would make local governments fiscally less dependent from central government.…”

Section: Literature Reviewmentioning

confidence: 99%

“…They have found statistically significant negative effect of lump-sum grants on tax revenues of German states. Similarly, Cardenas and Sharma (2011) have investigated the fly-paper effect and its relation to local government revenue effort for 1195 Mexican municipalities using panel data for 1993 to 2005 periods. They have confirmed the presence of flypaper effect, although they have pointed out that the magnitude of the effect is inversely related to the municipality's economic well-being (for example, the magnitude of the effect should be approximately 0.6 in very poor municipalities and approximately 0.3 in very rich municipalities).…”

Section: Literature Reviewmentioning

confidence: 99%

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Transfer revenues, expenditures and tax effort of Slovenian municipalities

Pevcin¹

2012

Afr. J. Bus. Manage.

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This study has examined the expenditure and tax effort effect of municipal transfer revenues in Slovenia. Namely, transfer revenues received by local governments should stimulate provision of local goods and services, and consequently increase local spending. It is also predicted that this increase should be larger than one related to the equivalent increase in local income. Moreover, transfer revenues of local governments should also affect local tax (revenue collection) effort, either by increasing it (stimulation effect) or decreasing it (substitution effect). The empirical evidence based on the data for Slovenian municipalities has showed that transfer revenues have absolutely and relatively larger effect on municipal expenditures than the equivalent increase in income. However, transfer revenues have negative effect on local (municipal) tax effort, which means that substitution effect exists as transfers obviously substitute other local revenues.

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“…Evidence of the asymmetrical response hypothesis is mixed. Some studies find support in favor of the hypothesis (Gramlich 1987;Cárdenas and Sharma, 2011;Deller and Maher, 2006;Heyndels, 2001;Kjaergaard 2015;Lago-Penas 2008;Rattsø and Tovmo 2002) whereas others do not (Gamkhar, 2000;Gamkhar and Oates, 1996). The mixed findings do not, however, change the general conception in the public finance literature according to which changes in unconditional intergovernmental grants are predicted to have an expansive, and hence a fundamentally different, impact on expenditures than changes in other sources of municipal revenue.…”

Section: Introductionmentioning

confidence: 99%

Intergovernmental Grants and Public Expenditures: Evidence from a Survey Experiment

Bækgaard

Kjaergaard

2015

Local Government Studies

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The relationship between intergovernmental grants and public expenditures is one of the most studied phenomena in the local public finance literature. However, little is known about whether the impact of unconditional grants is fundamentally different from that of other sources of municipal revenue. We study this question by means of a large-scale randomized survey experiment among Danish local politicians, which allows for a comparison of the impact of changes in various sources of municipal revenue. Our findings challenge the conventional conception in the public finance literature that money works differently depending on which sector they are generated in. Instead, ideology plays an important role in explaining how local politicians want to allocate resources when faced with changes in local government revenue.

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Mexican Municipalities and the Flypaper Effect

Cited by 7 publications

References 18 publications

Does Flypaper Effect Exist? New Evidence from Turkish Municipalities

Does Flypaper Effect Exist? New Evidence from Turkish Municipalities

Transfer revenues, expenditures and tax effort of Slovenian municipalities

Intergovernmental Grants and Public Expenditures: Evidence from a Survey Experiment

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