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Fiscal illusion and the Australian local government grants process: How sticky is the flypaper effect?

Worthington, Andrew C. & Dollery, Brian E. (1999) Fiscal illusion and the Australian local government grants process: How sticky is the flypaper effect? Public Choice, 99(1-2), pp. 1-14.

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Abstract

It has been argued that evidence supporting the widely documented flypaper effect is a statistical artefact; more specifically that previous studies are compromised by the use of inappropriate functional forms and the endogeneity of intergovernmental grant programs. Whilst the first issue may be resolved with careful econometric testing, the second requires the incorporation of institutional constraints into governmental expenditure equations. Combining Australian local government expenditure equations and intergovernmental grant parameters, the flypaper controversy is analysed. Empirical results confirm the sensitivity of the flypaper effect to specification, and tests of fit unambiguously favour one functional form. That specification yields no evidence of a flypaper effect in the Australian institutional milieu.

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6 citations in Web of Science®

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ID Code: 2684
Item Type: Journal Article
Keywords: Fiscal illusion, fiscal federalism, flypaper effect, local government
DOI: 10.1023/A:1018329802757
ISSN: 1573-7101
Subjects: Australian and New Zealand Standard Research Classification > STUDIES IN HUMAN SOCIETY (160000) > POLITICAL SCIENCE (160600) > Political Science not elsewhere classified (160699)
Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200) > Public Economics- Taxation and Revenue (140215)
Australian and New Zealand Standard Research Classification > STUDIES IN HUMAN SOCIETY (160000) > POLITICAL SCIENCE (160600) > Australian Government and Politics (160601)
Australian and New Zealand Standard Research Classification > STUDIES IN HUMAN SOCIETY (160000) > POLICY AND ADMINISTRATION (160500) > Public Administration (160509)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 1999 Springer
Copyright Statement: The original publication is available at SpringerLink http://www.springerlink.com
Deposited On: 23 Nov 2005
Last Modified: 05 Jan 2011 23:26

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