Journal of Economic Perspectives
ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)
The Flypaper Effect
Journal of Economic Perspectives
vol. 9,
no. 4, Fall 1995
(pp. 217–226)
(Complimentary)
Abstract
What happens to a state's spending when it receives an unconditional grant from the federal government? The standard theoretical analysis predicts that the increase in spending will be the same as that generated by an equivalent increase in local incomes--or roughly 5-10 percent for most states. In contrast, numerous empirical analyses have found that spending increases by much more, with some estimates near 100 percent. This result is known as the 'flypaper effect,' since the money appears to 'stick where it hits.' The authors review this evidence as well as other studies that find similar behavior in firms.Citation
Hines, James R., and Richard H. Thaler. 1995. "The Flypaper Effect." Journal of Economic Perspectives, 9 (4): 217–226. DOI: 10.1257/jep.9.4.217JEL Classification
- H77 Intergovernmental Relations; Federalism; Secession
There are no comments for this article.
Login to Comment