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A Model of Asymmetries in the Flypaper Effect

Steven C. Deller and Craig S. Maher
Publius
Vol. 36, No. 2 (Spring, 2006), pp. 213-229
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/4624742
Page Count: 17
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A Model of Asymmetries in the Flypaper Effect
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Abstract

In this applied research study we examine the changing fiscal relationship between state and local governments. Our research question is simple: Do local governments treat state aid during periods of stability and instability in a systematic manner? Using data on Wisconsin's unconditional shared revenues program from 1990 to 2000, we find evidence of a flypaper effect and that the relationship tends to be asymmetrical. The manner in which local governments treat intergovernmental aid is different between periods of increases and decreases in aid. Specifically, using a model that allows for the identification of structure shifts we find evidence of fiscal replacement. In addition, we find that changes in aid impact types of spending differently. When aid is reduced, policymakers appear to be less inclined to cut police and fire services than they are to cut services such as parks and recreation.

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